A Tribute to the Thoughts of Another and his Friend"Everyone knows where we have been. Let's see where we are going!" -Another

Friday, June 3, 2011

Open Letter to Ron Paul

Dear Dr. Paul,

I would like to share with you what I think is a brilliant opportunity for you to lead the revaluation of the US gold stockpile from its present book value of $42.22/oz. which, as you say in the video below, "makes no sense whatsoever." I think that when a rare opportunity like the one I’m about to describe presents itself, the least we can do is to give it fair consideration.

While watching your recent hearing on YouTube, I was struck that the Fed's General Counsel Scott Alvarez had to explain to you that the Fed doesn’t own any gold. Here's the clip to which I am referring. It should begin automatically at 1:35:

Had you been reading my blog (not that you would be, of course, but maybe now you’ll start ;) you would have known this by at least last October when I published It’s the Flow, Stupid. Here is an excerpt, and this is important to the opportunity I will present:

Here is something you need to understand about the US gold. The Fed does not own it. The US Treasury does. Following the Gold Reserve Act of 1934, the Treasury gained title to the entirety of the US monetary gold (including $3.5 billion which was currently being held by the Federal Reserve banks). From that point on, the Fed has received [from Treasury] private issues of new-fangled gold certificates in $100, $1,000, $10,000 & $100,000 denominations -- not to be paid out and not for circulation.

So the Treasury took 175 million ounces of gold from the Fed, paid the Fed in DOLLAR-DENOMINATED certificates for this gold at $20 per ounce, then revalued gold to $35 per ounce. So if the Fed had even been able to redeem those certificates for gold in 1935, it would have only gotten back 100 million ounces. The windfall of 75 million ounces of gold ($2.6 billion), in this case, went entirely to the US Treasury and not the Fed.

The entire Treasury windfall was $2.8 billion and was the reason and the funding for the establishment of the ESF, the Exchange Stabilization Fund in 1934. So following the Gold Reserve Act of 1934 100 million ounces of gold were already automatically monetized. The rest of the US gold was eventually monetized through the Fed. The way this happens is the US Treasury issues fancy new non-negotiable, dollar-denominated gold certificates to the Fed and the Fed credits the Treasury account with dollars.

Today, all of the US gold has been "spent" in this way, but only at the price of $42.22 per ounce. That's 261,511,132 ounces of gold monetized at roughly $11 billion, money that was spent long ago.

So you see, the Fed cannot mark the US gold to market. It cannot even revalue the US gold. Only Congress can. And even if Congress DID revalue the gold, it would not change the Fed balance sheet by one penny. The Fed only holds dollar-denominated certificates worth $11 billion, payable in gold, but not really. It's kind of like Aramco in 1945 who owed the Saudis $3 million, payable in gold.

If Congress DID decide to mark the US stockpile of gold to market today it would find it had a new stream of revenue. At today's price of $1,328 per ounce, the US gold would be worth $347 billion. Subtract the $11 billion already on the Fed balance sheet and Congress could immediately ask the Fed to credit the US Treasury with $336 billion new dollars to be spent.

Here is a little more background from a couple of my more recent posts. Hopefully it'll start to be clear where I'm heading with this. This next one comes from January in my post, RPG - Update #1:

"Meanwhile, due to the woefully outdated paradigm established by the US Congress for gold held by the Treasury Department, the gold reserves of the United States are effectively anemic and bedridden upon the books of The Federal Reserve System, where they exist only in certificate form — valued at a static $42.22/oz., forming a paltry $11 billion stake."

That's right! The Fed doesn't even have actual gold on its balance sheet that can be used as a reference point. It has "gold certificates" issued to it by the US Treasury from the past monetization of US Treasury gold at $42.22/oz. I suppose, technically, if the US Treasury wanted to revalue its gold to the market price today, the proper yet antiquated process would be for the Fed to credit the Treasury's spending account with new dollars representing the difference in price. Today that would be about $355 billion fresh dollars for Congress to spend. Yet there would still be no existing mechanism to automatically account for the new and emerging Reference Point: Gold. Something technical is going to have to change!

Did you notice that I underlined $355 billion? And farther above, which was from back in October, it was "only" $336 billion. Well, here's an excerpt from my very recent April post, RPG - Update #2:

Rather than selling the gold, why don't you just value it like the rest of the world? Why not just mark it to the market price of gold on the Treasury books? If you, Congress, are going to insist on an honest accounting of America's liabilities, why not properly account for her ASSETS as well?

And then… the US Treasury, under the daft guidance of [Geithner], can issue new gold certificates to the Federal Reserve. As anyone with even a rudimentary understanding of double-entry bookkeeping knows, the balance sheet must balance. For every asset there is a liability, and vice versa. This is basic stuff. You don't need to be a banking "expert". And so far the Fed only carries $11 billion of the Treasury's gold on the asset side under the gold heading. Today we have room to add $370 billion more, and that means fresh Fed liabilities—also known as US dollars—accruing as fully paid-up credits to the Treasury account for the government to use however it deems appropriate.

Again, I realize this doesn't solve any of the big problems, but it does buy some time. And furthermore, it is not a bad or reckless thing to do. It is the right thing to do! America has an untapped asset. You can use it without selling it for gosh sake! And just like the old gold certificates, the new ones will NOT be redeemable by the Fed or any other banks in physical gold. They will simply be an accounting entry on the Fed balance sheet. In the future, that gold can be mobilized, if necessary, in defense of the US dollar. But only with the approval of Congress. The physical gold remains the property of the United States. It will simply be monetized by properly revaluing it as the monetary reserve asset that it is, and placing it—at its proper valuation, updated quarterly—on the asset side of the central bank's balance sheet, just like the ECB.

That's right, it jumped again. From $336 billion in October, to $355 billion in January, to $370 billion in April. And guess what it is today. $390 billion! That's the amount of untapped equity the US Treasury has in its gold today. And that equity can be monetized without selling the gold, by the simple act of Congress ordering the revaluation of the gold.

This is simple logic, Dr. Paul. It doesn't take a room full of lawyers to figure out if it is feasible. It is plainly obvious, which is why it is so stunning to me that Tim Geithner is playing the ridiculous juggling game that he is today, essentially plundering retirement accounts ("disinvesting intragovernmental debt") by $66 billion to keep feeding the big government Frankenstein monster:

"Since May 16, the debt subject to the debt limit has been $14.293975 trillion each day, showing that Treasury has $25 million in breathing room under the debt ceiling.

"...it's not completely transparent how Treasury is managing the debt versus the debt limit on a daily basis... We do know that Treasury has used three of the tools available: Suspending G-Fund reinvestments, redeeming investments of the Civil Service Retirement and Disability Fund (CSRDF), and suspending new CSRDF investments.

"...The ultimate day of reckoning comes when Treasury runs out of cash, not when it runs out of room to issue new debt. Many in Congress and the press appear to confuse the two, and Treasury hasn't worked that hard to draw a distinction..."[1]

Perhaps there is another "tool". One that doesn't require raiding the retired and disabled.

The gold certificates on the asset side of the Fed's balance sheet are not even paper certificates with fancy fonts and pictures. They are electronic book entries representing the dollar-denominated amount of $11 billion. They no more represent the US gold by weight than they are redeemable in that gold. They are a nominal dollar token accounting entry.

The Fed's "Fisher" was wrong [here] when he said, way back in 1997, that a revaluation of the gold would require selling off other assets to balance the Fed's books. Firstly, if Congress were to revalue Treasury's gold, that would not automatically revalue those "certificates". They have no market value because they are irredeemable, non-negotiable and obviously unmarketable! Secondly, even if it were to automatically affect the Fed balance sheet in some cartoon universe, selling off other assets is not the only way to balance a gold revaluation. The more logical way is for the Fed to issue new Fed liabilities, aka dollars, to the owner of that collateral that is rising in value.

Think back to when house prices were actually rising. If you bought a house for $250K and it was suddenly worth $350K did that revaluation automatically appear on your bank's balance sheet as an additional $100K asset? Of course not! But you, as the homeowner, could put it on the bank's balance sheet with a HELOC or a second mortgage.

Maybe you could call this gold revaluation a GELOC to tide you DC spendaholics over until you can get your act together later this year. And that (soon to be) $400 billion "bridge loan" will not even be debt in the traditional sense, and it certainly won't be "debt subject to the debt limit" any more than Bernanke's QE is subject to limit.

Honestly, the Eurozone is so far ahead of you DC guys on this it's not even funny. They mark their official gold reserves to the market price every quarter, and they just voted to make gold a system-wide acceptable collateral asset. [2]

"The European Parliament's Committee on Economic and Monetary Affairs Tuesday agreed unanimously to allow clearing houses to accept gold."

OMG! Can it be that a collateral asset that is consistently rising in free market value makes boatloads more sense than ones you have to prop up with quantitative easing and open market "print to purchase" operations??

One last thing. If you start to marking to market the effects of all this money printing, it will not only at least bring some benefit to the country, but it will also highlight the growing value of gold reserves for every American to see and learn from. Perhaps a few will even "save their savings" before it's too late. All those peeps you save might even nickname RPG "Ron Paul Gold!"

Okay, I promised myself I'd keep this post short since it is an open letter to an important and (I'm sure) busy man. And as my readers know, some of my posts tend to run a little bit on the long side. That said, Dr. Paul, I'd like to also invite you to read my last post, which is titled The Return to Honest Money. It's about you, and Rothbard, and Menger, Mises and Hayek as well as a few more. I think you'll like it. But at least it might be worth your fair consideration.

I'm glad I'll now be able to look back and say I was there when the term "Ron Paul Gold" was coined. With any luck, I'll be recounting that story to my grandkids someday when I tell them all about the Monopoly-esque monetary system I grew up in. And by Monopoly, I mean the boardgame with the imaginary money, not the business concept. Although given what the Fed does when it comes to money, it could be apropos of both.

*grin* I kid. I kid. I do want to say that there is a growing realization across the blogosphere that silver is not gold. You can read it in the comments of quite a number of sites that only used to push silver that folks are really starting to see that gold is the ultimate long term protector of wealth and as such is far more desirable than silver in that role.

"Since the SLA owns silver for political reasons, not trading outcomes, at some point, the majority of silver owners around the world will be 100% cash owning physical silver owners – and this then becomes a de facto precious metal standard guaranteed to destroy the dollar (as the world reserve currency)."

@d2thdr, if the US decide to mark gold to market as the dollar's primary reserve asset, as in the case of the euro, then they would no longer have an interest in seeing an artifically suppressed price for "gold". In fact, quite to the contrary I would think; the higher the better.

As a relatively recent reader of this excellent blog I have a more general question than might be appropriate for this specific article. This may have in fact been answered before, but i am not completely through the archives yet, so excuse my ignorance.

The Freegold theory seems to me to make a great deal of sense, but where i hit a bit of a roadblock (personally) is what I see as the assumption that gold will move in a vaccuum and the flow of gold will stay static after a "true" price discovery.

I somewhat accept the arguement that a large percentage of above ground gold is being physically held by non western individuals and governments, but if gold did greatly appreciate in value compared to everything else I cannot forsee a situation where the market wouldnt be saturated with gold for sale. Yes, people like to save, and yes gold is probably the most efficient holder of value in the world today, but the thought that a middle class (or less as many of the third world holders of physical gold are) family would not sell their jewelery for the capital to buy a vacation house seems to me to be a bit... unrealistic.

True, i may not trade my coin, or a sheik may not trade his bars at 20, 30 or 40,000 usd (or what can be bought for the equivilant amount in fiat) as we are interested in saving, but there will be a pricing point where this trend is broken.

If we settle on 55,000 usd or equivalent per ounce on this blog and many of the savers of the world are satisfied holding their gold at that price, we can ask the question 'what price does it take?'. Mr and Mrs Taiwan may be very invested in passing wealth down to future generations, but if their gold is worth say 200,000 usd or equivilant per ounce then maybe they buy themselves a Greek island or some other maintainer of value (I am thinking land in this case).

I hope i have made this question not too fractured, but i would appreciate the input of the people who have been paying attention to this longer than I.

If you own something that you have been watching ratchet up and up and up, from $1500 through $10k, $20k, $30k, etc... yes I guess there will be some people who kick up their heels and part with some (but probably not all they have?). The higher it goes, I would like to guess the more people pull back from selling ... expecting this to continue. Until a new equilibrium is achieved, the price stops rising and becomes stable. Even then though, I suspect people will have come to see gold for what it really is, and won't want to sell all of it. Only time will tell us for sure.

@ DP,I agree with you. My opinion was based on reading 'Confiscation Anatomy- Different View' was if US marks gold to market, that's it for USD.

We will see an parabolic increase in the exchange rate v GOLD.

Besides all the past claims will be called in by both global players and even its own citizens. Too many lawsuits....

Hence I say 'though Ron Paul is honest, if he sees how this is going to play out (by allowing gold to be marked to market), he will be held responsible for bringing down the USD. Instead of allowing the natural demise, why would anyone want to be held responsible for this?

Perhaps all of the members of congress would rather stand idly by as the dollar edifice naturally tumbles of its own accord. At least they can't be blamed then.

My feeling is that if nature takes its course and the dollar ultimately crumbles, that really will be "it". The US dollar and economy will be OVER.

Perhaps with the Ron Paul Gold solution, something could still be salvaged from the wreckage. Perhaps the US economy could continue to stumble along and ultimately rediscover its footing again, rather than that dire Dark Ages alternative. It must be admitted there are no sweet alternatives that I have seen anywhere. RPG is about as sweet as it gets.

But you're right, it will seem bad to most people. (They wouldn't have experienced the alternative.) So, it would really take some Statesmen to stand up and deliver this redemption. It will be about as good a way to be hated as if the system otherwise self-destructed on your watch. Feels like Hobson's Choice really.

I am not very knowledgeable as some others here are. However, I remember a post made by 'Blondie'.

I perceived it something like this,'The wealth in the west is visible in terms of excellent infrastructure, social security, an apparent affluent way of life. However, the wealth in the east is hidden in gold- due to various reasons including customs/traditions, it is/will be used in whatever way the holder of gold deems necessary. For the holder of this wealth reserve par excellence, he/she does not care for the dollar denominated value in broad terms. He/she cares of this dollar denominated value only during the need to use this wealth reserve. For he knows, it will hold its value no matter what era he will be exposed to. In many ways, they are more aware of the concept of FREEGOLD/ REFERENCE POINT GOLD than most western and some eastern traders and their ilk.'

I am not very knowledgeable as some others here are. However, I remember a post made by 'Blondie'.

I perceived it something like this,'The wealth in the west is visible in terms of excellent infrastructure, social security, an apparent affluent way of life. However, the wealth in the east is hidden in gold- due to various reasons including customs/traditions, it is/will be used in whatever way the holder of gold deems necessary. For the holder of this wealth reserve par excellence, he/she does not care for the dollar denominated value in broad terms. He/she cares of this dollar denominated value only during the need to use this wealth reserve. For he knows, it will hold its value no matter what era he will be exposed to. In many ways, they are more aware of the concept of FREEGOLD/ REFERENCE POINT GOLD than most western and some eastern traders and their ilk.'

Congress requiring the Treasury to MTM its gold reserve, and thereby the Fed to continuously monetize gives Congress an interest in perpetually rising gold price in dollars.This feedback loop is an HI mechanism.

As the value of gold rises, the value of the dollar falls. Good for Congress meeting its obligations, not so good for holders of dollars... this is cash dumped on your (White House) front lawn, the Fed being forced to print its obligations to the Treasury as these obligations spiral away.

(What happens if the price falls? Dollars are now owed back to the Fed, as the value of the dollar rises?)

MTM to the (paper) market price... this may raise the public awareness of gold (or at least change the dynamic of the gold market) to the degree that unencumbered physical would ultimately diverge from paper (encumbered and/or fractionalized) gold.

This move (MTM Treasury gold reserves) would collapse the Fed, the dollar, and the $IMFS.

If the US was to mark gold to market quarterly as the EU does, would it be more likely that this would cause the $US price of gold to rise in an orderly fashion over an extended period of time, rather than be suddenly revalued upward?

There's no mechanism that would require monetization of the full value simply because it was being marked to market, any more than a homeowner in 2005 was forced spend his entire home equity. Furthermore, there are many ways the option of monetization could be used. Retiring debt is one way. More from It's the Flow Stupid:

"And then, if they let the value of the gold float, anytime the price rises, they could issue more fancy dollar-denominated gold certificates to the Fed and be credited with new dollars to spend. In fact, at a Freegold price of $55,000 per ounce, Congress could retire the entire US national debt without giving up a single ounce of gold, merely monetizing what it already has through the Federal Reserve. But what will really happen someday soon is the additional step of opening the vault and allowing that gold to FLOW again, but at a floating price. With this one move Congress wouldn't have to retire the entire national debt because credibility would be reestablished.

You see, the European gold reserves are far better, far more credible than the US gold reserve, simply because they engage in a two-way gold market, and have for decades. The US gold has been hoarded and locked away for more than 30 years, never deployed in case of emergency. The European CB's took a lot of flak for selling gold over the past two decades, but that action is precisely what makes them so much more credible (and valuable!) than the US gold hoard. Any trading partner knows full well that if all else fails, gold will be paid."

It should be fairly obvious that this post was not meant as a three page magic bullet. But it's not meant to be a trap either. I actually think it would be a step in the right direction. For a couple years now I have proffered that getting out in front of Freegold is the USG's only chance of avoiding the worst of what's coming. Of course, like anything else, it could, and probably would be abused by the spendthrifts in Congress. But I don't see how it could possibly make anything worse. Do you?

Ron Paul knows the FED isn't the holder of the gold... he's actually very clever and is asking questions he already knows the answers to in order to make a point and shine a focus on inconsistent statements by the FED. It's a game of "let's see what questions I can ask to make you blunder." That's what is typically done in these hearings.

However, I do believe Ron Paul is not familiar with FREEGOLD as presented on this blog, and it would be tremendous for him to be exposed to the concept.

Peter said... 'Another' says that if the Gold is owned by the Treasury for 'good' reason, since were it in the hands of the Fed as reserves for the dollar, it would be vulnerable to being claimed by the BIS"

I also remember this claim by others, distinctly in Another's Thoughts. Does the US have to issue a "new" dollar to make this work?

I think it's fair to say that back in 2008, Ron Paul got me started on the journey that has lead me to this blog. I am still a libertarian and a Ron Paul supporter, but after reading FOFOA and Freegold I have a kind of equanimity about the developments in the political / financial system.

It's interesting to go back and listen to these smart guys talk about sound money backed by gold. They may not see Freegold coming (and I wouldn't have either without help from my Friends) but I don't think they will be completely surprised when it happens.

I think the main attraction of sound / honest money to libertarians and the followers of the Austrian school of economics is that they see it as a way to stop the expansion of government and the erosion of individual liberty.

Ironically, these libertarians who see that it is futile to legislate morality with prohibitions and that it is damaging to intervene in the free markets do not see (yet) that it is just as futile to legislate / intervene with another natural, inevitable force - the debtors desire to borrow and to socialize his debt burden.

I think it's because of the limited perspective of recent history that it's easy to lose track of another natural human force - the savers desire to preserve what he earns and assert his individual sovereignty - that also acts as a variable in the evolution of our political / financial system.

There's plenty of evidence of a movement in society towards collectivism and consolidation of power, but the opposing force of freedom is still there. The cycles of civilization throughout history do show the movement of free societies towards centralized power, but then revolution comes!

The drive towards freedom is as natural and inevitable as the drive towards domination. What you oppose, you strengthen so the more freedom is attacked, the more freedom will fight back.

The interesting thing to ponder is whether these opposing forces remain equal or if there is a progression over time.

I think there is a progression, an evolution towards freedom and the decentralization of power - it's just hard to see it at this stage in the cycle. So it turns out: On a long enough timeline, even I am not a cynic!

Whether or not there is progression towards utopia, I think that Freegold will be an important part of the next phase of Freedom.

Sirch, So does FREEGOLD have the same dilemma as liberty? That is, if freedom is the natural state of man, why don't we have it already? Why does it take so long? Will freegold take as long, or longer? Or never? There are opposing forces, which may be greater than the 'natural' forces; if we have to fight for liberty, why not freegold?

In a broader sense and in questioning the attitude of freegolders that everything will just automatically fall into place, think of the effect of a totalitarian society with no economy. Freegold would not work so well, if saving and lending is not only against the law, but has no meaning with no 'money' of any sort due to no exchange between parties. All because of pesky laws.

Does the analogy hold together or fall apart? Is it prudent to take political action, or can we just sit back and relax and receive liberty and freegold for all?

"Freegold would not work so well, if saving and lending is not only against the law, but has no meaning with no 'money' of any sort due to no exchange between parties. All because of pesky laws.".

As you've observed many people strive for peace while many others see war as a better alternative -- I don't think any of us are going to change that any time soon.

But keep in mind that many atop the financial ladder as well as those that make our laws are also debtors. They don't want to see our transactional economy come to a halt anymore than you do. Commerce will continue far into the future as it has in the past. People (and nations) will continue to find value in trade for the things they cannot produce themselves.

Freegold was set in motion long ago and will come to light whether we want it to or not. Governments and CBs are not the ones that first opted for Freegold -- they are merely front running the rest of the world that did. Having said that, if you decide to buy physical gold you will certainly add some pressure to the system, but there is no need to buy gold for political reasons. The only reason to buy physical gold is to preserve your wealth. It's that simple.

Info:http://theautomaticearth.blogspot.com/2011/06/june-1-2011-future-of-physical-gold.html Thanks for that article, I am looking forward to a response from FOFOA. Freegold being called a lie fits with Arts socialistic opinion. Freegold, having been planned so long ago could have gotten sidetracked. I hope not!

as Mises and other great economic thinkers intimate, economy is fundamentally human action

human action is motivated/incentivized by economic need

the most basic economic action is incentivized by survival needs

as human society/economy becomes more integrated and complex, more and more division of labour, further and further increases in technology and standards of living, human trade is still the fundamental driver of the society/economy

as i've learned to understand it through FOFOA blogspot, it's all about the flow of goods/services

it's all about the flow

all societies are a greater representation of their economy, of their human action

the spectrum, then, is based on the degree of freedom/degree of control (coercion)

totalitarian society represents human economy further towards to coercive end of the spectrum

ultimately, the question of freedom is, how coerced is the flow

how much control, what sorts of control mechanisms are infringed upon the natural free flow of human action and decision-making

from there, value is contorted, malinvestment and moral hazards ensue

human history is a struggle for determining that degree of freedom/coercion

from my perspective, the savers prefer more economic freedom, so they are safe to save without their property being stolen, whereas the debtors prefer coercion because they want others to fund their interests, and as time goes on it requires more and more force to keep that going, because otherwise the savers would at some point refuse to offer up their savings

Terry said..."Freegold being called a lie fits with Arts socialistic opinion"

Please, I prefer you do not lump my argument re: Freegold into the arguments of Art. I certainly don't think Freegold is some kind of socialist banker conspiracy (which should be clear from the fact that I use Marx's theories of capitalism to argue that Freegold is unlikely).

When I said it would "serve as a lie for the masses" in Part II, I meant that in the same way that almost everything governments/banks around the world say in public serves as propaganda. It is meant to convince you that the economy will soon stabilize and recover, and that there is no fundamental problem with financial capitalism, as along as adequate safety mechanisms are either implemented (Neo-Keynesian) or "evolve" with the free markets (Austrian/Freegold).

"That is, if freedom is the natural state of man, why don't we have it already? Why does it take so long? Will freegold take as long, or longer? Or never? There are opposing forces, which may be greater than the 'natural' forces"

Freedom is a natural desire of man, but maximum individual freedom (libertarian) is obviously not the natural state of society / government.

And that would be because - speaking very generally - the desire to be free is opposed by someone else's desire to control you.

Both forces are natural. The desire to be free and the desire to control are like the Yin & Yang. By observing human history we see that the strength of one over the other cycles over time and varies in rate and degree by location and culture.

Whether one is winning the war over the other even while losing some battles is up for debate.

"If we have to fight for liberty, why not freegold? ... Is it prudent to take political action, or can we just sit back and relax and receive liberty and freegold for all?"

I am saying that the only action required is personal action while you seem to suggest that political action is required - control over the actions of others.

As individuals "wake up" and make a decision to save in gold and not fiat, freegold is unfolding "on its own." It's not unfolding without any action or change, but freegold is unfolding without any coercion.

People want and need a way to save their wealth for the future. This is a natural desire that does not need to be forced or legislated - it's a manifestion of survival instinct.

Freegold is about recognizing that fiat is failing in the function of saving wealth for the future and that gold is rising to take its place. For a long time now, people - especially those with the most to lose aka giants - have been losing faith in fiat and gaining faith in gold. Some were never fooled to begin with and were always on Team Gold and betting against Team Fiat.

If by "sit back and relax" you mean after saving in gold vs. saving in fiat then yes, that's all it takes because more and more people - with varying amounts of influence - are making that same decision every day.

You said-"When I said it would "serve as a lie for the masses" in Part II, I meant that in the same way that almost everything governments/banks around the world say in public serves as propaganda"

You eat up all of this conspiracy bull. Rather then conspiracy,it looks to me like the politicians and central bankers have committed to Keynesian and behavioral economic policies.(the fiat seducement) They are the ones who designed this floating currency system anyway. And yes, behavioral economics does involve propaganda but it is not propaganda if you really think it will work.

You said-"It is meant to convince you that the economy will soon stabilize and recover, and that there is no fundamental problem with financial capitalism"

You see things through a radical socialist prism. Capitalism exists on a biological level.

You said", as along as adequate safety mechanisms are either implemented (Neo-Keynesian) or "evolve" with the free markets (Austrian/Freegold)."

You have that totally wrong. Free markets exist despite keynes. Austrian/freegold is a connotation of the free market.

If there is any interest in such a thing, maybe the superorganism here can work together (in the method of OpenSource or a Wiki) to create / edit / revise a description of Freegold that is as short and accurate as possible and better than anyone one of us could create on our own.

Or if you would just like to submit your own attempt I know I would like to read it. Of course, if FOFOA wanted to take this challenge I would gladly defer.

If it's good enough maybe FOFOA might want to use it as a Freegold Introduction post that could be prominently displayed as an "Introduction" or "Start Here" link or used as the link to Freegold newbies - the best possible answer to the immortal question: "What is Freegold?"

Here is my attempt at a Freegold description in 150 words:

Long-term stored wealth is moving out of Fiat and into Gold. At some point in the future the ratio of stored wealth in Fiat vs. Gold will no longer be enough to sustain the international monetary and financial system.

The current debt-based monetary and financial system must continually expand or it will collapse. The decline in demand for new debt for the purpose of long-term wealth storage will stress the system.

The current gold market cannot expand too much or it will collapse. The system is mostly made of paper promises fractionally reserved with small amounts of physical gold. The increase in demand for physical gold will stress the system.

These combined stressors will eventually collapse the current system and a new system will evolve with gold as the supreme long-term wealth storage asset; that new system is called Freegold or Reference Point Gold.

Do you honestly think all of those politicians, bankers and economists are just feeding you manipulated statistics and misleading soundbites without knowing what they are doing at all? It's all completely unintended? I suppose Jean Claude Juncker was just misinterpreting his own thoughts when he said this a few weeks ago:

"When it becomes serious, you have to lie..."

If you a do a bit of independent research, you will find much more revealing statements made throughout history, especially the last few years, and even more revealing actions. So spare me the anti "conspiracy theory" nonsense you fall back on when you can't legitimately or logically counter a well-researched argument.

"Capitalism exists on a biological level."

Oh yeah? Maybe you can point me to some research identifying the "capitalist gene", or perhaps "capitalist hormones". BTW, capitalism is technically a specific system of production in human society, not a system of competition and exchange in "free markets". So natural tendencies for humans in groups to often act in a self-interested and/or rational manner does not necessitate capitalism in any way.

"That's why Part II focused on Marx's theories of value creation in a capitalist economy, and how his theories are completely distinct from the subjective "marginal utility theory of value" embraced by Austrian economists, such as Menger."

"...Marx, however, is clumsy in his use of his mediaeval weapon; to speak of a "substance" as an "unsubstantial reality" would have horrified the acute metaphysicians whose phrases he borrowed. We are then told that "a use value or useful article" has " value only because human labour in the abstract has been embodied or materialized in it" (p.5); so that use value is value as before defined plus utility of the product. Having grasped this conception, the student of Marx is startled to learn, two pages later, that "a thing can be a use value. without having value," as air, &c. (but why call this Use value, when value is absent?) and that "lastly, nothing can have value without being an object of utility," because "if the thing is useless so is the labour contained in it; the labour does not count as labour, and therefore creates no value..."

It is my contention that even if you find the right way to describe this as simply as this, or even in its most simple formula like this, people will actually be much more likely to reject it outright because it seems so foreign that something this simple could have this kind of infinite resolution.

In my experience, it is far better to show people a variety of small sections of the beautiful and infinite landscape which, in a few cases, will spark the personal desire to understand the simple formula behind it. But this is a personal journey one must embark on willingly, which is why FOA used the analogy of hiking a trail to reach the view.

That said, here was a two paragraph description. As you can see, if falls pretty flat to the uninitiated. Here’s a page that someone is building. I have nothing to do with this page, but he (I forget who it is) has an email address listed if anyone wants to help him out.

The author primarily relies on Steve Keen's "Nudge, Nudge, Wink Wink" paper to "refute" Say's law and apparently by extension, the foundations of Austrian economics. Here is the author explaining Keen's "debunking" in "The Future of Physical Gold, Part II - The Evolution of Value":

Marx: "The expansion of value, which is the objective basis or main-spring of the circulation M-C-M, becomes his [the capitalist's] subjective aim, and it is only in so far as the appropriation of ever more and more wealth in the abstract becomes the sole motive of his operations, that he functions as a capitalist... Use-values must therefore never be looked upon as the real aim of the capitalist. Neither must the profit on any single transaction. The restless never-ending process of profit making alone is what he aims at." Nudge Nudge, Wink Wink, Say No More, pg. 4)

Keen: "Since Say’s Law and Walras’ Law are in fact founded upon the hypothesised state of mind of each market participant at one instant in time, and since at any instant in time we can presume that a capitalist will desire to accumulate, then the very starting point of Say’s/Walras’ Law is invalid. In a capitalist economy, the sum of the intended excess demands at any one point in time will be negative, not zero. Marx’s circuit thus more accurately states the intention of capitalists by its focus on the growth in wealth over time, than does Walras’ Law’s dynamically irrelevant and factually incorrect instantaneous static snapshot." (Debunking Economics>, Ch. 9) "

Steve Keen said: "Liberty Student is right in his last comment here in one way--I am used to debating the neoclassical versions of Say's Law, which they call (a) Say's Principle and (b) Walras' Law. It has taken me some time on this list to realise that maybe you have another conception in mind."

**********

So the author's argument is predicated on Steve Keen's refutation of Say's law, yet Steve Keen himself has admitted he was not refuting Say's law and doesn't understand what actually is Say's law. The second iteration of a previously exposed and admitted strawman argument offers nothing to address.

Perhaps you missed this part of the article (Part II) re: Marx initial role for use value in value creation:

As mentioned before, and contrary to what many official "Marxists" and "Neo-Classical" critics say, Marx did not believe a commodity's use-value had no role to play in the creation of surplus value within the M-C-M+ circuit. The following excerpts from Dr Keen's paper, entitled Use-Vale, Exchange-Value and the Demise of Marx's Labor Theory of Value, further explain Marx's initial analysis of surplus value in the industrial capitalist economy [emphasis mine]:

Marx: "We are, therefore, forced to the conclusion that the change originates in the use-value, as such, of the commodity, i.e. its consumption. In order to be able to extract value from the consumption of a commodity, our friend, Moneybags, must be so lucky as to find, within the sphere of circulation, in the market, a commodity, whose use value possesses the peculiar property of being a source of value." (pg. 5)

Keen: "Marx specifically referred to the use-value of a machine being greater than its [exchange] value, and in contrast to his discussion of depreciation in Capital, dissociated the productivity of a machine from its depreciation. The use-value of a machine will differ from its exchange-value and, as with labor, we can assume that its use-value will be "significantly greater than its value." In practice this will mean that the amount it loses in depreciation will be significantly less than the amount it contributes to the value of output, and it will, with labor, be a source of surplus value."

The use-value, however, is a result of its objective utility in performing a specific function in a specific context, and subjectivity is only relevant to the extent that it is involved in assessing objective use-values. Therefore, "his theories are completely distinct from the subjective "marginal utility theory of value" embraced by Austrian economists, such as Menger", as I stated before. I'm not sure why you are trying to dispute that, as it is plainly obvious to Marxists, Austrians and every other label of economists...

I don't have time right now to address JR's second comment (out the door to watch the NBA finals game... I know, I'm a capitalist hypocrite), but I just went through that entire thread on the Mises forum, and it's funny (and unsurprising) that JR says Keen got "pwned", because it seems clear that the exact opposite occurred. I especially liked this comment on the last page by "Mash":

http://mises.org/Community/forums/p/7596/158307.aspx#158307

I'll try to get back to this later... but Keen in no way admitted that he "misunderstood Say's law", as JR divines from the brief comment he made... come on, JR, you can be be less obviously misleading than that.

Steve Keen said: "Liberty Student is right in his last comment here in one way--I am used to debating the neoclassical versions of Say's Law, which they call (a) Say's Principle and (b) Walras' Law. It has taken me some time on this list to realise that maybe you have another conception in mind."

**************

"Marx did not believe a commodity's use-value had no role to play in the creation of surplus value"

I'm glad you acknowledge utility is not "completely distinct" from Marx.

you said-"Do you honestly think all of those politicians, bankers and economists are just feeding you manipulated statistics and misleading soundbites without knowing what they are doing at all? It's all completely unintended? I suppose Jean Claude Juncker was just misinterpreting his own thoughts when he said this a few weeks ago:

"When it becomes serious, you have to lie..."

Yeah and that is behavioral economics !lie or not. They believe in behavioral economics. Do you know what behavioral economics is ?

You are asserting that freegold is behavioral economics and that is BS. Freegold is the result of failed behavioral economics.

@costata: *Richards looks at the Debt as the point of interest and how to get rid of it via slow 4% inflation. Check what he thinks about interest rates and why they are down...*Another looked more into how things were going/worked underneath the open and visible. And look here why he thought interest rates will go through floor...

JD ( @home ) ID#253201: I don't get it. Also if the Saudis have been trading oil for gold they lost money over 17 years. Period. 2 and 2 is 4 not 20."

JD,They have also held a few billion in underground oil that went from $30+ in the early 90s to the $20 range today. Would we say they lost money in oil? Yes, they owe money. Yes, they play the paper game. They also would make good poker players as they hold an ACE where noone can see! They are not like you or I, for them 2 and 2 is 40!

----------------------------------

Date: Sun Nov 02 1997 23:06 JTF ( @Home- ANOTHER's Comments ) ID#57232: "I think a period of inflation followed by sudden deflation would be far more likely for certain of the world's currencies. This is already happening in SE Asia. I cannot believe there will be no inflation or deflation. "

JTF At this moment in time and space, the price of oil in US$ terms is about to roar! It will crush the Pacific Rim and South America. It will drive the US$ sky high in terms of other major currencies but the dollar will collapse in terms of gold! Short term interest rates in the USA will be driven thru the floor much the way they have been in Japan from the early 90s. This will be done to combat a imploding equity market. Long government bonds will almost stop trading as their yield soars from the oil price fears of "inflation"! Because of todays "new digital paper markets" this entire act will be played out in 30 days or less. Yes, you are right! During that time we will have inflation and deflation."

@costata: Do you remember also that part where it is mentioned that to devalue dollar you do not need to revalue gold, any CB, e.g. China can do it... :o)

@Fofoa, relevant to the Open letter:

"5/3/98 ANOTHER (THOUGHTS!)

Mr. Kosares, Your friend thinks much of this gold owned by the USA. It could be used to back the dollar up to 25%, no? Many come to this thinking and hold a secure thought, that as last resort, this gold will save the day! I think, many persons never gained the understanding that the American gold is kept by the "Treasury", not the maker of your money, "The Federal Reserve". It is there for good reason, as the present world currency system is not a function of American law! If the US were to place gold in the hands of the US/CB as reserves for the dollar, the BIS could claim it! It is, as a point of contention and of no real use. I think not a war would come of this claim, if it should happen! As the world currencies are now, a "new dollar" would be needed if gold were used as reserves! The present dollar would then, truly be as "paper for the wall"!

The urgent drive to create a new "reserve currency" began in the early 80s, after the last small "gold war". The road to making this new Euro did never include gold in large amounts, until the last few years! Even one year ago, the news would say, 5% or less. Today, we speak of a much greater amount! This is interesting, yes? The BIS did "hatch" this deal in a very late fashion! The future of the Euro was found to be "weak", as the Middle East oil imports onto the continent would continue in dollars! This was so from the dollar being made strong in gold. Gold priced in dollars at near production cost, offered a "no switch currency" position, for oil. This position has been unstable for the last year, and the alternative of a switch to gold was in progress! You have read my "Thoughts" before. Now the BIS does offer to "change the rules of engagement", a real reserve currency is offered!

Few do grasp what is happening and why! They think the holding of gold reserves by the Euro is of a little point, as to what good are gold reserves? One cannot use gold as Marks or Yen to intervene in currency market to support the Euro. My friend, the BIS has played the, as you say, "big poker hand"! The holding of large reserves by the ECB and the withholding of sales from the market will not only bring the end of the London paper gold market, it will, thru a high USD gold price, "make the dollar weak in gold"! From this position, the dollar will lose the "oil backing" from the Middle East! At first, all oil for Europe will be in Euro's, then all producers want "strong currency"!

There is more: Many say, how to defend Euro without much currency reserves? If gold go to many thousands US, what will be used to bid for Euro as defense? I say, these persons will find a problem on their computer screens! You see, the Euro will start as "nothing", no holdings of size, anywhere! The dollar is held as reserves as "the stars in heaven"! It is to say, "the dollar will bid for the Euro", not "the Euro will bid for the dollar"! All currencies will "flow into the Euro for trade". But, if the Euro becomes so strong, how to compete in world trade? It will be the price of oil that will make the "trading field" level! The soaring US$ price of gold will make even a 10% Euro reserve be as 100% today, in USD! Oil will become, very, very cheap in Euros and allow that economy to do well! Many other countries will see this and also want to join the new "world reserve currency" that has become"the new world oil currency"!

The politics of the ECB? It is as a "side show"? We watch this new market, yes? Sir, my words take time. I did receive two E-mail's from you.

Costata :"This interview with Jim Rickards over at King World News is worth listening to IMHO. Sounds a lot like "savers vs debtors" to me."***************Financial Repression plus price control of gold equals complete control of savers assets. Their hands in our pockets. The financial owners won't be denied their portion of our savings. Freegold will only happen if it was by their design.

Keen merely pointed out that he may not have been addressing the specific conception of "Say's Law" that was embraced by the so-called Austrian economists on that site. Here are some of the fundamental propositions of Say, as described by "Mash" on that site:

Say's law was written as a refutation of the idea that there can be an a general overproduction within all markets. althought he did state that it could occur by 'violent means' which he stated as being government policy and natural disasters.

the following are the main propositions:

1. When someone demands something, they will produce a commodity. IF this commodity finds 'vent' on the market, they will receive money and use this money to purchase a commodity they demand.

2. Money is only a medium of exchange. It performs only a momentary function and there is no desire to hold it for longer than necessary, lest it's value decreases.

3. The previous point leads to supply being equal to demand. As a producer will want to get rid of as much of his produce and money as quickly as possible. By selling his produce and exchanging his money for a commodity his demands.

4. it also leads from the previous point, that a producer will only supply to the extent that he demands another commodity.

5. There can be a glut iof a particular commodity due to having outrun the total demand either because it has been produced excessively or production of other commodities has fallen short.

6. Scarcity of money has little to do with obstruction of its sale.

7. an identity that aggregate supply is equal to aggregate demand.

Now, this is simple. If you agree with the above propositions of Say, then I stick by my criticism of Say's Law in the article (it is completely invalid, as initially shown by Marx's description of the M-C-M+ circuit and its evolution over time). If you, for some reason, believe that Say actually believed overproduction could endogenously exist in the entire economy for some significant period of time (insufficient agg. demand), then you are probably misinterpreting what he originally said, but nevertheless, you agree with the Marxian premise of my articles.

If you are holding on to some third alternative conception of Say's Law, then you should state it clearly, instead of arguing that other people are wrong because they don't understand your interpretation of Say's law that you never present. That is what the posters on the Mises forum did, until Keen got fed up and left, but fortunately "Mash" continued on to basically shut them all up.

http://mises.org/Community/forums/p/7596/158307.aspx#158307

Oh yeah, then some moderator on the Mises forum sent a very distasteful message to another poster about how he gets molested by his family (or something like that), and the at that point completely inane thread appropriately died.

"Yeah and that is behavioral economics !lie or not. They believe in behavioral economics. Do you know what behavioral economics is?"

Yes, I do, and while it may be a component of failed neo-keynesian policy, it is not fundamentally why people in power lie. Complex institutions of political and/or economic power create structural incentives for those benefiting from them to maintain confidence in the overall system via propaganda (lies). That fact applies regardless of whether the people are exerting power under the guise of a "Communist" dictatorship or a "neo-liberal" global system of "free-market" capitalism.

I'm glad you acknowledge utility is not "completely distinct" from Marx.

I do, and once again, I never said it was in either my articles or these comment threads (in fact, I said the exact opposite as shown by the quote I posted). It is, however, completely distinct from the marginal utility theory of value used by many Austrian economists, as I stated before.

Damn, posted 3 comments, and of course the most lengthy one was eaten up...

To summarize, JR and DP, Keen only stated that he may not have been addressing the conception of "Say's Law" that was held by the so-called students of Austrian economics on that site. Here are the propositions of Say's Law, as written by "Mash" on that thread:

Say's law was written as a refutation of the idea that there can be an a general overproduction within all markets. althought he did state that it could occur by 'violent means' which he stated as being government policy and natural disasters.

the following are the main propositions:

1. When someone demands something, they will produce a commodity. IF this commodity finds 'vent' on the market, they will receive money and use this money to purchase a commodity they demand.

2. Money is only a medium of exchange. It performs only a momentary function and there is no desire to hold it for longer than necessary, lest it's value decreases.

3. The previous point leads to supply being equal to demand. As a producer will want to get rid of as much of his produce and money as quickly as possible. By selling his produce and exchanging his money for a commodity his demands.

4. it also leads from the previous point, that a producer will only supply to the extent that he demands another commodity.

5. There can be a glut iof a particular commodity due to having outrun the total demand either because it has been produced excessively or production of other commodities has fallen short.

6. Scarcity of money has little to do with obstruction of its sale.

7. an identity that aggregate supply is equal to aggregate demand.

Now, this is simple. If you agree with the above propositions as being accurate of his law, then I stick by my original criticism of Say's Law in the article (it is completely invalid, as initially stated by Marx in his description of the MCM+ circuit and its evolution over time). If you believe Say did not endorse those specific propositions, then I believe you are misinterpreting him, but your conception is probably still at odds with Marx's M-C-M+ description, and therefore I still believe it is invalid. If not, then you agree with my Marxian premise in the article series...

The problem on that Mises thread was that the Astroglide poster completely misinterpreted Keen's argument against Say's Law from the beginning:

The interesting thing about Mr. Keen's argument seems to me to be how it so quickly falls apart once it is revealed that it depends logically on Marx's theory of profit, which in turn depends upon his labor theory of value.

Wrong. Not only does Keen's argument not rely on Marx's LTV, but he explicitly rejects LTV in other papers using Marx's own logical analysis, as I explained earlier.

Astroglide also says:

And finally, a discussion of Say's Law vis-'a-vis Austrian profit theory is also included, where it is shown that Say's theory takes account of temporary supply imbalances, and by so doing comports quite well with the Austrian conception of profit.

I haven't gotten around to reading his paper yet, but it seems that he believes Say's Law can be interpreted to allow for temporary imbalances that will eventually correct themselves, and I would agree. Still, that conception is invalid, because imbalances actually may never correct themselves in the capitalist system, and, in fact, they have not. That is something that Keen pointed out in the thread, but the other posters failed to understand what he was saying and started making various circular attacks on Keen himself, and eventually Keen got fed up.

Fortunately, "Mash" continued on to basically shut all of them up with this post:

http://mises.org/Community/forums/p/7596/158307.aspx#158307

Finally, some moderator of the forum sent a very distasteful email to another poster (something about being sorry for that he was molested by his family...), and the thread appropriately died.

Now, if you guys have some completely different conception of Say's Law, you should come out and say it or at least reference it, before saying another analysis is invalid because the author doesn't understand the conception of Say's Law floating around in your head...

1. They will only buy further commodities if they believe they will have a use for them in the future (in personal consumption, or production of more product for sale). Otherwise they would, I believe, choose instead to sink their surplus into a reliable store of value, until a time of their choosing for consumption.

2. It ("money") also might provide a reliable store of value mechanism, but in the case of the $IMFS that is indeed not the case. So any right-thinking super-producer should try to identify something more reliable in this regard (and not desire to hold cash for longer than necessary). This is only rational and predictable behaviour.

3. While people do not see cash as a reliable store of value, yes. There is an infinite demand for a truly reliable store of value, to sink the unwanted cash into when there is no desire to reinvest in further production - which will be the case while there is no incentive (profit).

4. He will supply any time there is demand for his goods and services that he can sell at a profit, while he knows he has something he can use to reliably store his accumulated surplus (profit) until a time of his choosing that he wishes to redeploy. He might instead reinvest his surplus immediately if there is current demand for his output that will provide him with an incentive to do so (profit), otherwise he will be looking for the store of value, for which there will be infinite demand. Under the $IMFS this might not be the case, but under RPG it will. The reliable store of value (RPG) is the economic escape valve, soaking up the problem you identify: profit is the incentive for production, and the profit has to both come from and end up somewhere or another.

5. The desire for products of almost any stripe would be limitless, were it not for the inability of consumers to find the cash to pay. They do clearly have to prioritise though, while they only have so much cash to go around. Hoarding cash is anti-social, given that this contributes to scarcity of the same. Having a recognised and reliable alternative store of value, on the other hand, is socially positive - it frees up the cash to people who wish to circulate it instead, in addition to the advantage to the super-producer in achieving his own goal: wealth preservation.

6. Right, if there is something that you need or really want, you will spend money. (I presume the "it" for sale here was the cash.)

7. As I stated earlier, my contention is there is infinite demand for almost any product or service, limited only by the availability of cash to consumers.

By stretching the price of the item employed as the primary store of value, one is at the same time:

(a) rewarding super-producers with a safe option for having done their thing and contributed positively to society, rather than leaving them with little choice but to reinvest in more production, whether there was demand or not

(b) rewarding any consumers that forego consumption until later; providing an incentive for them not to be wasteful.

Such a primary store of value escape valve guides supply and demand into harmony. With a safe place to park savings, there is no longer the systemic requirement to chase after growth and a yield, just to stand still. The pressure you see building in the system, the extraction of profit, is given an outlet: into gold, where it will hurt nobody and benefit everybody.

Why are you still here, Art? It doesn't seem like you're looking to learn anything, so much as to teach? That being the case, good luck.

"2. It ("money") also might provide a reliable store of value mechanism, but in the case of the $IMFS that is indeed not the case. So any right-thinking super-producer should try to identify something more reliable in this regard (and not desire to hold cash for longer than necessary). This is only rational and predictable behaviour.

5...Hoarding cash is anti-social, given that this contributes to scarcity of the same."

Yet, they haven't done what is "rational and predictable" or "socially positive" for hundreds of years now, have they? Is it because governments have forced them to behave irrationally despite the existence of somewhat "free markets" in the capitalist system of production, or because they both (governments and capitalist markets) have contributed to the natural evolution of "easy money" systems that concentrate productive wealth over time? My argument is that it's the latter... which seems to be something you still haven't figured out.

That is also why you keep talking about what Freegold will ideally provide for the system, as if I'm arguing against that. Freegold would have been a great system to have, at least significantly better than what I call the "debt-dollar disciplinary system", but alas, it never occurred, and I highly doubt that it will in the future.

"Why are you still here, Art? It doesn't seem like you're looking to learn anything, so much as to teach?"

I have understood your argument for some time now, captain obvious, but am now looking to explain to others why it is flawed and present an alternative framework of understanding. Fortunately, it seems to be working with people who are open to a combination of technical theory and common sense, which probably includes some people that were previously "on the fence" with regards to Freegold. I do appreciate that FOFOA has allowed me to continue posting links and comments here... and I hope that will last.

The problem on that Mises thread was that the Astroglide poster completely misinterpreted Keen's argument against Say's Law from the beginning:

The interesting thing about Mr. Keen's argument seems to me to be how it so quickly falls apart once it is revealed that it depends logically on Marx's theory of profit, which in turn depends upon his labor theory of value.

Wrong. Not only does Keen's argument not rely on Marx's LTV, but he explicitly rejects LTV in other papers using Marx's own logical analysis, as I explained earlier.

Astroglide also says:

And finally, a discussion of Say's Law vis-'a-vis Austrian profit theory is also included, where it is shown that Say's theory takes account of temporary supply imbalances, and by so doing comports quite well with the Austrian conception of profit.

I haven't gotten around to reading his paper yet, but it seems that he believes Say's Law can be interpreted to allow for temporary imbalances that will eventually correct themselves, and I would agree. Still, that conception is invalid, because imbalances actually may never correct themselves in the capitalist system, and, in fact, they have not. That is something that Keen pointed out in the thread, but the other posters failed to understand what he was saying and started making various circular attacks on Keen himself, and eventually Keen got fed up.

Fortunately, "Mash" continued on to basically shut all of them up with this post:

http://mises.org/Community/forums/p/7596/158307.aspx#158307

Finally, some moderator of the forum sent a very distasteful email to another poster (something about being sorry for that he was molested by his family...), and the thread appropriately died.

Now, if you guys have some completely different conception of Say's Law, you should come out and say it or at least reference it, before saying another analysis is invalid because the author doesn't understand the conception of Say's Law floating around in your head...

You said "Yes, I do, and while it may be a component of failed neo-keynesian policy, it is not fundamentally why people in power lie."

What lies specifically ? Bernanke said he will counterfeit US dollars out thin air and monetize debt. He did it.Bernanke says he wants at least 2% inflation, hes doing it. The G20 got together and devalued the Yen for all to see.People get what they deserve.

You said "Complex institutions of political and/or economic power create structural incentives for those benefiting from them to maintain confidence in the overall system via propaganda (lies)."

It is still every man for himself. Are you aware that allot of oil states where doubling down on US financial's in 2007, just before the wipe out ?

Those oil states got what they deserved. Anyone holding Sino forest stock got what they deserved and anyone holding US debt (corporations) are going to get what they deserve.

Actually, Bernanke said he would not monetize the debt in front of Congress, and then he did when the markets started to roll over again. The BLS says that solid jobs are being created every month, but they are not really, as is clearly evident from the data. They said the stimulus money and TARP funds would make its way into the real economy, but it did not, and only created some speculative price inflation that will inevitably destroy more wealth for most people if/when prices collapse again. And guess what? The "unexpected" collapse will make it easier for them to institute even more destructive policies for the real and imaginary wealth of 90% of the global population, while telling you all the while it is good for you.

The only question is, how long can this process last and how bad will it make the inevitable collapse? I'd say longer than most expect (perhaps another decade), and quite bad.

…hyperinflation is the process of saving debt at all costs, even buying it outright for cash (FOA)

Here is a hit piece against the ECB elaborating on how far they have gone down that road:

http://www.openeurope.org.uk/research/ecbandtheeuro.pdf

It is a fun exercise to take a look at the balance sheets of the various CBs and make up a rough assumption on how much debt needs to be written off (say, reduction of government debt to 30% GDP and ignoring everything else). Then put all that debt on the 'assets' side of the CB's balance sheet, set it to zero, and work out by how mucha) the price of gold needs to increase to compensate for the lossesb) the monetary base would increase in the process

Alright, here is the very brief summary of my argument in the articles so far:

Part I, Dialectic Foundations - The evolution of the capitalist system of production created roughly two socioeconomic classes, as Marx described - those who own (I would say "control") the means of production and those who sell their labor to the former. The history of capitalism (and all of the monetary systems that have arisen within it) has been characterized by a dynamic struggle for wealth/power between these two classes, and the flow of wealth has generally been towards the capitalist class, which especially strengthened since the 1970s. This complex economic system has fundamentally constrained the range of monetary and sociopolitical outcomes that can occur (I analogized this to the process of quantum decoherence in the beginning)

Part II, The Evolution of Value - The means in which economic value is created has also evolved (and been constrained) with the complex economic system, as Marx pointed out when discussing the emergence of "exchange-value" that is distinct from a commodity's "use-value", and therefore allows the production of "surplus value". In accordance with the dialectic class struggle, SV has been increasingly concentrated in the MCM+ circuit (where money is exchanged for commodities to produce, monetize and hoard surplus money).

Part III, The Final Realization - The above process presents an internal conundrum for capitalism, because there is less and less ability for SV to be monetized in various markets when wealth is increasingly concentrated and centralized (smaller producers/retailers are absorbed by larger ones), which unsurprisingly coincides with concentration and centralization of political authority. For that reason, the system necessitates both productive and then speculative finance to pull forward effective demand and create the illusion of wealth. This process is also self-limiting over time, as shown by Minsky's financial instability hypothesis, and has essentially run its course as the last greatest fools in the global economy were sucked in and tapped out of their biggest source of equity created from decades of productive labor (OECD homeowners).

All of the above was described with periodic references to how/why it undermines the prospect of Freegold, or any other attempts to "re-capitalize" the global financial system for that matter. I am in the process of writing the final part (IV) right now, which will focus more on the implications for the future roles/values of physical gold.

d2, it should be clear that people who are dependent on the financial industry would run to Freegold in ecstasy if they caught a realistic whiff of what's actually happening, per what I have argued in numerous articles over the last year. The major players are actually the ones who own much of the gold in the first place. I have never worked in finance myself.

BTW, I do own some gold (and some silver), and yes, I would stand to gain A LOT more from Freegold, if it did occur, than I do from writing articles for someone else's website (TAE) or even practicing as an attorney in the US for a few years in this economy.

Hello again, Captain Caveat, and thank you for your most illuminating reply.

First up, I must apologise to you for the delay in my getting back to you, but I took the recent advice of a friend and spent some time this evening relaxing on a lake. At first I hadn't seen you there in email on my phone, but then ... poof! ... there you were before me! Anyway, enough of my self-indulgent stories about my personal life - let's get right back to the real world of discussing economics! ;-)

I've got to tell you, it was something of a revelation to me that you understand Freegold sufficiently to see the flaw in it! I nearly fell out of the boat. That's the Holy Grail of this blog of course! So anyway, I got to thinking... with your deep understanding of Freegold, your obvious way with the written word, the widespread desire here for a proper summary of the Freegold concept, and your clear desire to seek out an audience that wants to listen to you and be saved from disaster.... Perhaps you would be just the man to put together a couple-paragraph Freegold primer? Once you've done that, it seems like it should be simple for you to progress on to simply highlighting the flaw(s) that you see? To my mind, at the moment, I can't see anyone either here or at TAE who understands what you're saying, least of all me. Perhaps this approach might work better, not unlike our previous bullet-points breakthrough? Waddayathink?

I'm still working on some reading but just as a "end of quarter" question...Are you saying that the shortfall of demand based on M-C-M* circuit is compensated with bringing the demand from the future (based on extending credit/increased indebtness)?

DP..."but I took the recent advice of a friend and spent some time this evening relaxing on a lake"

It's a great thing, isn't it? I just thought it wouldn't be fair to dump my (end of the) worldview on people here and not give them any advice on how to stay sane... fortunately, when the world ends, lakes will still be around and the wind will still blow through sails... but you may find it difficult to keep your boat! Along with gold and silver, I also own some precious steel and lead.

Anyway, why would anyone possibly need a Freegold primer from me, when you have a vast archive of well-written and insightful posts by FOFOA? Yeah, they're a bit lengthy and somewhat abstract/confusing, but anything worth doing takes time and patience, right? My bullet point summary of the article series may be helpful, but it doesn't mean much without all of the details that back it up. Perhaps my articles are even harder to comprehend than FOFOA's, but read them enough times, and you will eventually get what I'm saying... and it will feel that much more rewarding!

Yeah, but with the promotion of speculative finance you are not even bringing forward future demand, but creating the illusion of bringing forward future demand. And productive finance always tends to (d)evolve into speculative finance over time, even without the central bank targeting low interest rates.

Which reminds me, another concise and insightful analysis by CHS today for those who may have missed it:

As a background context, we might start by noting that Marx outlined how finance capital comes to dominate industrial capital, as industry comes to depend on the credit extended by the banks/finance capital.

The key takeaway: if you don't control the banks, then they will end up dominating industrial capital. In the U.S., we have the worst of both worlds: a dominant financial Elite and various cartels (military-industrial, sickcare, agribusiness, etc.) that have captured what little of the Central State that isn't already beholden to financial capital.

If gold is revalued, it will supplant the USD as the savings vehicle of choice. That has existential implications for the USG, and this its why it won't happen. They aren't going to let that horse out of the barn "just to see what happens".

I call that savings vehicle of gold a " reserve currency", because it acts as a reserve and it most certainly can be used in transactions like a currency, if one so chooses, which I think would increasingly be the case in a world of FReegold.

Or how about this. the US could, in addition to FRNs, issue "gold dollars" freely redeemable in gold at your local bank. A two tier system. To the extentnthey could actually convince people it would be redeemable, not taxed, and not fractionalized (many a constitutional amendment or something, with annual 3rd party audits etc) that would act much as ""Freegold" is envisioned.

Do you think savers would buy Tbills paying zero interest, or gold dollars? Some, but not as likely. Interest artes would ahve to be real rate positive. Do you think gold dollars would, like a "currency" be used in trade? I do. Not often, but they would be used.

So that is what I mean. The USG absolutely cannot allow gold to supplant the USD as a "reserve currency", at least not if it values it's ability to have USD universally accepted in trade. Because it doesn't have an unlimited amount of "golden dollars" to buy stuff if thats what counterparties start demanding.

The world is bigger than the US Fed. The world savers and producers have had their pocket picked by the US for too long. If the US could keep the dollar reserve they could but the world is moving on. That is the whole point of A/FOA writings. I laugh when people say the US will not 'allow' things to happen. Wake up to reality.

Perhaps I did not entirely understand your point, Texan. In the meantime, however, I'm on board with Jeff. The evidence is clear that the dollar is being supplanted as the premiere wealth storage mechanism globally.

In truth the dollar never was a reserve currency as evidenced by what happened in '71. The rest of the world has the leverage to reduce the dollar to a shadow of its former self and there is no incentive-especially given that the shadow making can occur in stages- for them not to see that happen.

The golden horse is out of the barn and has busted through the corral.

It takes very little effort to figure out that the Rothschild family controls more money than any other family on the planet. They own controlling interest in most of the large banks of the world, like the Federal Reserve, the IMF, the World Bank, and most of the major European banks. I read an article last week that their fortune is estimated to be 20 trillion, but I think that figure to be modest. That they control the money of the world is not a stretch, and they have been in control for more than several generations. Their control goes back to before world war 1, where they are implicated in the Bolshevik Revolution. I am comfortable believing that they are the agents of the financial owners of this planet. I have spent many hours trying to deduce their objective, and I believe their objective to be the accumulation of all the gold on the planet. I would say that they are achieving their objective.

Apologies if this has already been cited here. Some current affairs (from the Guardian):

The US fears that Saudi Arabia, the world's largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show.

The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom's crude oil reserves may have been overstated by as much as 300bn barrels – nearly 40%.

The revelation comes as the oil price has soared in recent weeks to more than $100 a barrel on global demand and tensions in the Middle East. Many analysts expect that the Saudis and their Opec cartel partners would pump more oil if rising prices threatened to choke off demand.

However, Sadad al-Husseini, a geologist and former head of exploration at the Saudi oil monopoly Aramco, met the US consul general in Riyadh in November 2007 and told the US diplomat that Aramco's 12.5m barrel-a-day capacity needed to keep a lid on prices could not be reached.

Indenture are you serious? I think the "doing what" and "money" were both explained by FOFOA in his article.

I agree with FOFOA/Freegold.

I just don't get how it is a benefit to allow more debt to be created. To hasten the collapse? No this may slow it down. Certainly does not slow down the spending. Only reality will do that when it slaps them in the face - many, many times.

You said"-The key takeaway: if you don't control the banks, then they will end up dominating industrial capital. In the U.S., we have the worst of both worlds: a dominant financial Elite and various cartels (military-industrial, sickcare, agribusiness, etc.) that have captured what little of the Central State that isn't already beholden to financial capital."

In your linked article above Peter Schiff said a lot of insightful things (which are not really news to regulars here), but this passage from his conclusion illustrates the shortcoming in his logic:

"Markets are powerful things, and require a reliable medium of exchange. "

He is correct on both counts, but has neglected to observe that a reliable medium of exchange exists only in the presence of a reliable (objective) store of value.

Once the market figures this out and installs a reliable store of value, all the other issues (including a reliable medium of exchange) take care of themselves.

This oversight on his part is the root of why he doesn't get Freegold.

This quote from RS bears repeating:

"When you understand how it is that it is economically (and therefore politically) undesirable for other major currencies to appreciate against their peer currencies (which is exactly what would happen to any currency replacing the dollar’s reserve status), you will subsequently know why gold shall continue to emerge as the de facto solution to the international reserve question.

And here I emphasize de facto rather than de jure because this has become a global phenomenon driven by a natural evolution (survival and ascent of the fittest) and does not require any additional international treaty or enabling legislation as a prerequisite or for motivation.

The breeze is fair and the road ahead is clear for the ascent of gold."

"Then you have the gall to say that the stuff you write is more insightful and harder to understand then FOFOA."

Haha...yes I like to flaunt the fact that my articles are harder to understand than other people's, which invariably makes them more insightful and better... I figured someone like you would completely misunderstand that comment.

I was being completely serious when I said FOFOA's articles are very insightful, and the fact they are difficult to understand is a function of that...not the other way around (and I think my articles are similarly logical and deductively valid, but quite hard to "get" at first). That's also why I said in Part I of my series that the differences between my argument and Freegold are actually very subtle, and rest in the theoretical foundations of how we perceive economic/societal evolution. I find a lot of valuable information and unique perspective in many of FOFOA's articles... but there are a few I completely disagree with from the beginning, such as The Debtors and the Savers and The Value of Gold. There are others, however, where I think he makes a lot of good points and presents quality info, like some of the ones on hyperinflation, freegold foundations, and a few others.

In many ways, I would compare him (and other Freegold advocates) to Marx and his flawed predictions of Global Communism. He dissected the system of capitalism he was living under like a brilliant surgeon (with a few major slips, like LTV), but in the end he needed to deliver a neat package to his readers that explained where everyone was headed. He needed to give his followers a natural outcome of capitalist evolution that would encompass the entire world and set the workers free... but it did not happen, and it most likely will never happen, at least for many generations.

Anyway, maybe instead of making blanket accusations, you can tell me what I am misunderstanding about Freegold, M, and how I am "fronting my misunderstanding" as a flaw. Also, the "key takeaway" you quoted was not written by me, but Charles Hugh Smith. He's right, though...

Hi FOFOA (my friend ;-)If I recall correctly, there was an issue which precluded an upward re-valuation Physical Gold in possession of the USG. FOA was of the opinion that USTreasury Gold was euchered.Great to see you're still at it Sire.

"Anyway, why would anyone possibly need a Freegold primer from me, when you have a vast archive of well-written and insightful posts by FOFOA? Yeah, they're a bit lengthy and somewhat abstract/confusing"...Now that may be the only funny thing you have ever written, and the one of the few things that I understand. Unfortunately you didn't mean to be funny when you wrote it. Are you kidding me? You are calling Fofoa's articles abstract? There are at least fifty economic genius' on this site, and nobody understands what in the Sam hell you are talking about most of the time. You need to get your nose out of the Harvard economic manuals and go run a friggin' business sometime, and figure out what really goes on in capitalism. See how you like it when your hard earned money is stolen through inflation, taxes, and nationalized health care.

Marx was an idiot, and I'm sorry, but so is anyone who takes any of his theories seriously. He left out an entire class of people! Capitalism has been destroyed by socialistic parasites who worm their way into the system, going all the way back to ancient Greece. Like Thatcher said, you eventually run out of everyone else's money. Get rid of the ability to create a welfare state (i.e. Gold as as store of wealth and a backed, stabilized currency) and capitalism will reign supreme for a long, long time. Seriously, go buy a small business and run it for one year, and see if you want to read any more about Marx's friggin' MCM circuit. Just a bunch of bullshit made up by people who could never hold a job.

PS, I am definitely NOT one of the economic genius' on the site that I was referring to, so don't take the fact that I don't understand your writing too hard. But I have run many companies, and I know this-- Nothing you have ever written will help anyone run their business any better, nor is it a template for a better macro economic model than what we have today. I'm tired of reading meaningless, esoteric (but granted, nicely written) BS that serves no purpose other than an attempt to impress a professor that hasn't ever held a real job either. Nothing against you personally, but you clearly grew up in a different neighborhood than I did, buddy.

I have been quite busy lately. I am still working on that reply for you. Having noticed your third part of your post, and that you have said the fourth is the final part, I have decided to wait untill you are done with that before posting my reply.

you may now that a few days ago the EU/EMU officials/politicians voted positive to accept gold as collateral in dealings inside the Union.

Now this:

Published yesterday on Bloomberg regarding ECB's willingness to support the rollover of debt/bonds of Greece (and most likely other PIGS when the time comes).

"Under the plan being discussed by European officials, investors may be given preferred status, higher coupon payments or collateral as incentives to roll over the holdings when they mature, two separate officials, who declined to be identified because the talks are in progress, said last week."

Joel said:"Now that may be the only funny thing you have ever written, and the one of the few things that I understand. Unfortunately you didn't mean to be funny when you wrote it. Are you kidding me? You are calling Fofoa's articles abstract? There are at least fifty economic genius' on this site, and nobody understands what in the Sam hell you are talking about most of the time. You need to get your nose out of the Harvard economic manuals and go run a friggin' business sometime, and figure out what really goes on in capitalism. See how you like it when your hard earned money is stolen through inflation, taxes, and nationalized health care." **************************Amen, Joel. I have been thinking the very same thought, that Ash has been spouting Marxis hagwash and couldn't survive in a real business. I have had my own businesses since 1972 and suffered the same exact struggle to retain my excess earnings. Having developed a small hoard and surviving all this left thinking causes me to skim over Ash's oral feces. Stow it, please. Leave the space for the right thinking people. Thanks in advance.

Kurt: Sorry about the "money" question (I was thinking too many things) but I don't think it would be a disaster for the US to front run RPG. They would have to destroy the gold paper market in the process but how many alternatives are there except what appears to be the official mandate of 'print the dollar to oblivion because we have to'.

Blondie: It appears that Peter Shiffs voice and direction towards gold has shifted. Yes he hasn't used any terminology to suggest the difference between the paper price of gold and the physical price of gold in the article but he did talk about the inability of any currency to be a Reserve in today's world. I don't remember him separating currencies from gold in this way before. It feels like he is just on the edge of Freegold but he can't just come right out and say it. That was the impression I took from his latest. Of course I could be wrong because...

Joel: I am far from an economic genius and yet I have been able to understand FOFOA's writings as well as the writing of the almost all of the links provided (mortymer throws in challenges) but Ash, I think I finally understand you. You're writing for an audience of a few hundred, a few thousand professors who all use the same big, powerful words because they are big powerful words and by using them the true ideas of the prose are lost in the struggle to swim through the pompous verbosity.

I have two words for you guys - deductive reasoning. It's something that FOFOA uses quite a lot, but you obviously do not, so I'm not sure you really understand his perspective in the first place.

The fact that you have or do own a business that has been successful, despite various economic/financial struggles, says absolutely nothing about how the broader system of capitalism progresses over time, and what moves it. You are committing a huge logical fallacy (inductive reasoning to draw a firm conclusion), and convincing yourself that it is, in fact, the proper way to view the world.

Now, if you were to use that reasoning to develop a hypothesis about the evolution of complex systems and then develop experiments and/or models to test that hypothesis, then you may have something useful to contribute. Sorry, guys, but you need to go back to Logic 101 before you start trying to understand my writing (which is actually primarily based on complexity theory... something that Marx had an indirect, but utterly amazing understanding of for his time).

Oh, and re: FOFOA's writing not being abstract at times, have you even read the ones involving Austrian economic theories, or the ones explaining why gold-backed currency would not be the ideal way to go? How about the one on Mandelbrot, fractals and infinite resolution? Please, give me a break. Either you don't understand the meaning of "abstract", or you don't understand his writing.

BTW, I have had plenty of readers elsewhere tell me that they understood my articles after careful consideration, and one reader even gave me an excellent summary, which I am including in Part IV. So, don't take it personally, but you guys should try expanding your horizons a bit before making comments that essentially amount to synonyms for "childish" and "foolish".

Well, unfortunately Part IV got a bit lengthy (it had to be for the small clique of Harvard Professors who read my stuff, ya know...) and I am going to have to do a Part V as well. But I'm sure IV will give you enough to make your reply.

I have read Armstrong's work, mainly when it has been posted at Nathan's Economic Edge, where somewhat ironically, I have gotten quite good feedback on my articles.

Although I may not agree with all of Amrstrong's theoretical foundations or predictions, I think he provides a lot of valuable information and insights, and probably gets much more right than he does wrong. He also does not hesitate to think way outside the box and merge different theoretical concepts from diverse fields together, which is something I highly respect.

Which reminds me of a quote:

"Whenever there is great property, there is great inequality. For one very rich man, there must be at least five hundred poor, and the affluence of the rich supposes the indigence of the many, who are often driven by want, and prompted by envy, to invade his possessions. ... Civil government, so far as it is instituted for the security of property is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all." -Adam Smith

Marx, after all, was merely extending the already established ideas of classical economists.

As I was going back through FOFOA's archives to find articles that I had not read or had only skimmed, I re-discovered this one that I remembered really liking before - Hair of the Dog?

It's an articles that I would include among the ones that I previously said "provide a lot of great insights", and it probably helps that I'm also a big fan of Taleb. Here's an interesting quote:

"Some time ago I wrote, "There is an important difference between practitioners and theoreticians both in science and economics. Practitioners have always ridiculed the warnings of theoreticians and philosophers in almost all areas of human endeavor. Their attacks usually begin by pointing out the lack of practical experience of the theoreticians. But it is a very important role that theoretician play in society, to point out things that have been overlooked by the practitioners.

The problem today is that our markets are built, run and enforced entirely by former practitioners with a clear disdain for theoreticians and their warnings of low-frequency, high-impact inevitable events. This dynamic sets us up for catastrophic failures every once in a while."

"If you start to marking to market the effects of all this money printing, it will not only at least bring some benefit to the country, but it will also highlight the growing value of gold reserves for every American to see and learn from."Wouldn't that be the LAST thing they'd want? For the people to become even more aware of the gold/dollar disconnect? Just a thought...

@Joel/Terry, I read somewhere that you're, apparently, in need of some assistance... ;-)

An example of unsound deductive reasoning for you:

Premise 1: Smart people understand arcane language.Premise 2: Some people like to employ arcane language in their writing.Conclusion: Writers who use arcane language are smart.

The first premise is invalid: not all smart people understand arcane language, plus also some not-so-smart people happen to know some arcane language too. Most people aren't familiar with the arcane, by definition, but this does not infer that most people are dumb -- as implied by the first premise.

The second premise is, however, correct: arcane language serves no useful purpose but to impress some minority among the readership who happen to share this obscure information, however some writers do choose to employ it anyway.

So, we can see that the conclusion is unsound - it is valid, but the premises it relies upon are not. (In fact, IMO, it is an inversion of the correct conclusion -- but this is just an opinion, not a reasoned argument.)

An example of invalid inductive reasoning for you:

Premise 1: FOFOAs blog is dedicated to discussing: Freegold; hyperinflation.Premise 2: Art made some comments lately at FOFOAs blog.Conclusion: Art's comments are related to Freegold and/or hyperinflation, therefore making his contribution to the blog positive.

The conclusion clearly does not necessarily follow from the two unrelated, but this time both factually correct, premises.

Finally, an example of invalid deductive reasoning:

Premise 1: Commenter-A posts a comment containing a 7 point list relating Say's law.Premise 2: Commenter-B responds to the 7 items, placing each of his responses in a Freegold context.Conclusion: Commenter-B must have an opinion for/against Say's law.

The premises are both sound, but the conclusion does not follow from the premises.

I wonder, do you even, have or, ever had a job? Most of the people here just want to be rid of the parasitic left. Most of us have suffered the parasites too long, and just want to be left to our own devices. It is a shame that your genre just want to perpetuate the parasitic relationship professed by the Marxs and Keynesians in control of government today. The Fekete's, Munger's, Mises' and FOFOA's, prefer an honest economy, subsidized by honest work as in a meritocracy. Nobody here is going to buy your nonsense, so feel free to peddle it elsewhere.

DP, for all your talk/advice about wallowing in the warm embrace of Freegold, it appears you are really just a masochist at heart. So should I systematically tear apart all of your flawed pot shots at me, or just the first one, and let others deduce the rest? Well, you may be a masochist, but that doesn't mean I really enjoy dishing out pain, so let's go with the latter... ;-) :

"An example of unsound deductive reasoning for you:

Premise 1: Smart people understand arcane language.

Premise 2: Some people like to employ arcane language in their writing.

Conclusion: Writers who use arcane language are smart.

So, we can see that the conclusion is unsound - it is valid, but the premises it relies upon are not."

The above example is not deductive OR inductive reasoning, actually. Your "conclusion" is not related to your premises in any way, so you're "example" is just a list of three separate opinions that may or may not be accurate...

Let me provide you with an actual and a valid example of deductive reasoning (this is what was actually contained in my previous comments on this thread):

Premise 1: Insightful arguments about how human society has evolved over time employ abstract (philosophical) concepts in their development.

Premise 2: Abstract concepts are difficult to convey in a written human language.

Conclusion: The development of insightful arguments about how human society has evolved is difficult in a written human language.

Now, invalid inductive reasoning:

Premise: Some owners of businesses have been observed to generate net profits over time in a capitalist system.

Conclusion: Therefore, the capitalist system always allows for business owners to generate net profits over time.

With inductive reasoning, a conclusion could follow from a premise, but it is not required to follow. And then there's just plain old common sense:

Person A stated that Person B had "eventually acknowledged a dawning realisation that while he was busily refuting the position of others, he hadn't really understood what they'd been talking about." Person B had been "busily refuting" Say's Law. Person A most likely believes that Say's Law, as he defines it, is valid.

Does working as a valet, grocery store cashier, waiter, medical administrative assistant or paralegal count as a job? How about writing articles for a blog?

Seriously, man, you need to stop thinking in terms of left and right, democrat and republican. You think tea party politicians are going to solve the world's problems? You think every person receiving a food stamp out there is some kind of "parasite"? How about the billions who are living with absolutely no "safety net"? I'm sure you're probably older in age than me, but, really, it's time to grow up.

Ash said:"I'm sure you're probably older in age than me, but, really, it's time to grow up." ****So, why don't you start your own blog and charge for it? Would it be because nobody would be willing to pay for your gibberish? I appologize to everyone else, I was presumptious in saying I spoke for everyone else. I just figure that guns and gold relate to my favored choice of companions. Sorry!

You do speak for me.It's funny however how Art has been banned - which I found ok and this one can troll on of course scented with a pompous language and theories most people want to reject. And he goes on and on. I wonder why he has a better status quo than Art. Anyway lately it's becoming more and more embarrassing trying to ignore him. If I want to read about bloody marxISM I have lots to read in my country. We are specialists in this matter after all!

Honestly, that's a very broad question for me to answer. Collapse of what, exactly? And what will happen to what? I think I've gotten a few versions of that question from people here over a few threads, and I feel like I've given some general answers that match the questions. It's going to take me a lengthy article (Part V) to explain in relatively specific terms what I think will happen to physical gold after a dollar collapse, but the previous ones explain why I think Freegold is unlikely (and therefore gold will probably not achieve the dollar purchasing power implicated by Freegold). Part IV will explain why I think the dollar price of gold will deflate over roughly the next decade.

It's going to take me a lengthy article (Part V) to explain in relatively specific terms what I think will happen to physical gold after a dollar collapse, but the previous ones explain why I think Freegold is unlikely (and therefore gold will probably not achieve the dollar purchasing power implicated by Freegold). Part IV will explain why I think the dollar price of gold will deflate over roughly the next decade.

************************************

Tell us something new.

Another and his friend wrote 13 years ago about this. So what you are saying is nothing new and what you are planning to write is nothing new. Perhaps you are not aware of the 15 min fame that Prechter will enjoy?

Robert, your question is still quite broad and I can't really tell you whether we are headed for a "mad max" scenario. It depends on a lot of factors, such as your location, and also the interplay between financial, environmental and sociopolitical influences in those locations. I do have more specific views about those influences, but I can't really re-write all of them here... I'm going to direct you to this article, which explains my general framework for predicting what will happen, and links to more detailed analysis as well:

Ash, great job of proving my point with your own post. "Whenever there is great property, there is great inequality. For one very rich man, there must be at least five hundred poor, and the affluence of the rich supposes the indigence of the many, who are often driven by want, and prompted by envy, to invade his possessions. ... Civil government, so far as it is instituted for the security of property is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all." -Adam Smith

To my knowledge, they only believe(d) dollar deflation will last for a few months at most before it gives way to HI. So no, it's not nearly the same. 15 minutes could be quite a long time, depending on your relative reference point (see Einstein's theory of special relativity)

Let me paraphrase that in Capitalist terms. Yes, the guys that actually work for a living and provide a product or service that someone actually wants must be protected against the theft of their hard earned money by those who choose not to work, or attempt to make a profession out of spouting elitist Marxist drivel, most likely with some kind of left wing taxpayer subsidy. Protection of the property of those who have earned it, against the theft of it by those who have earned nothing.

The AS quote was to show that great thinkers can provide great insights even when starting from a flawed foundation and drawing flawed conclusions... Marx realized that "envy" was just an evolutionary manifestation of the need for self-preservation, and "democratic" governments were merely extensions of the private system of production that served to preserve status quo property relations. He greatly expanded upon the original ideas of classical thinkers such as Smith and Ricardo.

American born son of Indian immigrants, your dad was probably a math teacher at some liberal public university. You got great grades, and through some govt. program were able to attend Harvard or Stanford or some other overrated liberal think tank. Have your masters in economics, maybe even working on your doctorate.

One comment above, however, jumped out as interesting to me, as it’s something I’ve read before and felt uneasy about. I’d be grateful for comments.

The comment was “Most of the people here just want to be rid of the parasitic left”, which I take to mean “society should be run as a strict meritocracy, without monetary benefits, aid, or stimulus of any sort”. This sounds to me much like the arguments made by “free market” advocates, that (market) intervention is always impartial and ultimately detrimental.

A few problems I have with this:

Firstly, to my mind, Freegold doesn’t proscribe any particular political or even economical system. For a country and its currency to prosper, all it requires is a well-managed economy which maintains the trust in its currency such that it retains its value against gold. Left or right, up or down, it doesn’t matter. The truth will out - gold is the "tell".

Secondly, to discard social care, health, education, pension, benefits, etc. seems to be taking a giant step back in society’s evolution. Yes there are imperfections in the way these are organized, but perhaps under Freegold they would become more effective. The current financial system is designed to make paupers and slaves by stealing savings. These are not the real parasites, but those at the top who profit doing nothing. In a more equitable system (I call this “Blondie-world”), the parasites will have to actually do a day’s work for their money, only the really desperate would need benefits - and it would be inhumane to deny them. Everyone will be happy and the sun will shine.

Finally, “free markets” may run efficiently without Government intervention in theory, but I think many people here would be the first to agree that a large contributing factor to the mess we are now in would be the excessive freedom large financial companies are given to monopolize, manipulate and break the rules. The problem seems to be that they are allowed to escape the rules, rather than the rules themselves being problematic.

But like Obama, nobody would hire you, except for the valet, grocery store cashier, waiter, medical administrative assistant or paralegal jobs, which you are now way over qualified for. So you get mad at the system, and decide to become a Marxist, because that is the only way for you now to earn a living and get any use at all out of all those big words and ideas they taught you, because you have nothing that anybody wants or needs.

Your moral attachment to capitalism is so extreme that you fail to even realize I have not once argued that poor people deserve subsidies or handouts. As soon as someone mentions Marx, you panic and start blubbering like a cheap imitation of Sarah Palin. Notice that no one who really understands Freegold would or does do that... because it's all about what will happen and not what should. It would do you good to remember that.

Instead, we should content ourselves with knowing the generalized "solutions" derived from perturbation theory, and embracing its shortcomings. We start with the biggest influences on our global society and work our way down, until it becomes meaninglessly complex to continue. The size of the influence must be measured by its approximate timing and its systemic impact, which is largely rooted in the scope of the system which it affects (financial, industrial, environmental, etc.). We attempt to "calculate" the general pressures that will be exerted on civilization's path by each influence, adjusting the path's course as new influences are incorporated.

It is not a process that is nearly as simple as going from the Sun to the Moon, but it is still useful for calculating the general direction in which our global civilization is headed and the path we may all be on. These are the biggest influences that I perceive in general order of size (biggest to smallest), with an emphasis on the temporal contribution to influence, but there is certainly room for re-arranging the order or assigning equal weights to multiple influences:

(My personal calculations, with the exception of those relating to climate change and imperialist policies, are referenced by the relevant articles linked under each listed influence.)

#1 - The peak of speculative private debt in the global financial system, including both on and off balance sheet liabilities of individuals and institutions (the shadow derivatives markets). "Speculative debt" means liabilities that are only supported by deceptive accounting methods and/or worthless government guarantees, rather than productive cash flows.

#2 - The fiscal and monetary policies of governments and central banks in regions with relatively large economies. Among these institutions, the biggest influences would include the Federal Reserve, the IMF, the European Central Bank, the Bank of China, the Bank of Japan and the governments of the U.S., several European states, China and Japan.

#4 - The peak in global oil production that most likely occurred sometime between 2000-2010, and it's negative impact on economic growth for developed economies that mostly rely on imported oil, as well as major oil exporting countries.

#8 - Deterioration of the psychosocial and political structures of developed economies that are struggling with all of the above factors, and its contribution to systemic fear and violent conflict around the world.

By now, it should be clear that, even though the above is an extremely general list of influences, the interaction between them makes for a very complex task of prediction. There is a lot of room to add detail to the listed influences, such as specifics about public debt held in the EU and the U.S. or the range of policy tools at the hands of powerful institutions, as well as new generalized influences that will develop over time. That is why we must sacrifice high levels of certainty for generalized accuracy and a somewhat reasonable sense of where we are headed.

I will not rehash my calculations here, because that is obviously not the point of this article. Everyone must evaluate the objective evidence on their own, and use their mind's "calculator" to determine humanity's most likely destination. We must accept that our margin of error will necessarily be large, and we must also pay strict attention to details, because even the slightest perturbations can lead to radically different outcomes. It is often an extremely tedious, frustrating and mind-numbing process, but, frankly, there is no other option.

Note that I don't get any direct monetary benefit from people clicking on those links... it's just easier for me to do it this way. While I have the time to respond to specific questions, comments or accusations directed at me, I don't have the time to re-hash all of my views, which is basically what you are asking me when you ask for specific predictions.

Generally, as a result of only financial deterioration, I can tell you that I expect where I live (Virginia) to experience the same general trends that most places in the developed world have or will soon be experiencing. Namely, elevated rates of bankruptcies, foreclosures, unemployment, social unrest and crime. They will most likely reach levels that dwarf those seen during the GD.

I have been rereading some Armstrong papers tonight. Much like the comments section here he mentioned Marx, sound money and the gold standard amongst other things. The fixing of the speed of light was beyond the ambit of the papers.

Money is not gold. it is the full and complete productive capacity of the people that constitute the nation. Gold is the free hedge against the mismanagement of the state.

It has never been the gold standard that gives rise or fall to sound money. It has been the politicians who control the rules.

....you have so many analysts claiming we will see another Great Depression with massive deflation, that can only mean under the current monetary system where it is the dollar that is money and not gold. What they are saying is the dollar should rise, stocks collapse and that should take commodities and gold down and the confidence in government must then rise.

Gold is perhaps the most important market of all. It will be our guiding light to the near future, for there lies a very unique market more so than any other including the stock and bond markets. This is a Financial Commodity that is truly a worldwide market recognized in every country. This is the only worldwide market that performs a unique role as a vote of global confidence.

The world market may be bigger than the Fed, it may not be. That's wasn't my point.

I am discussing the topic of this FOFOA post, namely a "voluntary" revaluation of gold by the USG.

I thimk it is highly unlikely, as I think gold has the potential to be effectively - from a reserve/savings standpoint - the "the One". That's what Freegold is all about, right?

So I do not think the USG has any incentive to do as FOFOA suggests. At least not at the current time, and not by the current principal players.

That does not mean that the ROW/ "market" won't force a revaluation all it's own. Or will continue accept dollars for cheap oil, etc.

Those things may happen....or they may not. This is a very, very complicated situation, with even the political dynamic changing rapidly now (MENA). And I am sure that many of TPTB are heavily and massively vested in maintaining status quo, even if it requires some loss of value/power over time.

So I don't expect a currency regime change to be initiated by the Fed or the USG, or even by the ROW "suddenly". I would think it more likely we have a gradual "managed devaluation" over a period of years to try and effect some rebalancing between consumer and saver counties, to put it crudely, along with heavy periodic doses of commodity price spikes and then rapid demand destruction declines.

Basically, it's going to really, really suck for a long time, but I don't think there is going to be a total waterfall collapse.

Ash, in comparison to FOFOA, you aren't even in the same stadium. The difference is FOFOA produces original thoughts, that's why we pay attention to him. You , on the other hand have not shown one original thought in all the hogwash you have inflicted on us. If you have something original and inspiring, please let it out.

I appreciate the response and will read your stuff if I find the time and energy. Here are some thoughts I have:

Your predictions for Virginia don't sound any different than what we have right now, so I'm not sure its worth my time to dive into a bunch of philosophy that I'm not very interested in.

Fofoa has gone out on a limb by adopting and expanding on very specific predictions of what's coming. Imo, it makes for a more interesting read and is much more persuasive than generalized gloom.

It appears to me that you intensely dislike rehashing your specific calculations, whatever they may be, if they actually exist. Like you said, you want people to determine humanity's most likely destination from their own thoughts, conversations, and research.

That's great if you love arguing as much as you do. Because as long as neither you nor anyone else is ever specifically wrong or right, the argument never ends and the conversation never stops.

Personally, I want to be persuaded because I find arguing tedious, annoying, and loud. You said you find it tedious as well, but I find that hard to believe because of your never ending stream of rebuttals.

I don't think I'm intelligent enough to figure out humanity's ultimate destination, even with all the objective evidence in the world.

Your style is different than most I have read which I appreciate. It takes me back to the one philosophy class I took, but it also reminds me why I didn't major in philosophy.

I don't think your style will ever appeal to a large and sustained readership because its just too much work. I am not ashamed to admit I enjoy sitting back and watching the ball game after a day in the cellar.

Wrong. If he were to speak like that to a jury they would most certainly hang his guy, just to show him he "ain't so smart". Unfettered capitalism (without the corruption of socialistic influences) would find him guilty as well--of the charge of lack of utility. Let's talk about the odds of QE continuing, and if not, who is going to step up to plate to fund our debt, and at what interest rate level? How long can the banking industry sweep their toxic assets under the rug before it implodes? How will rising interest rates affect the timeline of a ratings downgrade, the bond market, or a possible currency crisis? Much more interesting topics to explore here other than agnostic puffery.

You do realize what "FOFOA" stands for, right? Being "original" isn't the measure of being accurate. That being said, I really don't know too many other financial bloggers who consistently apply complexity theory in their analysis, except for maybe FOFOA in some of his...

Anyway, I think I'm done with you too, because you are obviously running off of the same one-page playbook as Joel.

thedeadfauvi: I have no problem with describing the difference between Art & Ash and why one was banned and one remains (IMO). Art did not respond to individuals. He instead SHOUTED the same boring rhetoric over and over. Ash is polite and responds to questions posed to him. I think it's that simple.

While it's certainly true, and, perhaps, even likely, that the U.S. monetary authorities will continue to engage in their $42 dollar an ounce for gold charade, were they to stop with such silliness it would change very little from a practical standpoint.

You write,

"That does not mean that the ROW/ "market" won't force a revaluation all it's own. Or will continue accept dollars for cheap oil, etc."

I suppose it depends on how one defines a revaluation. By my runes the ROW have been, are, and clearly will continue to revalue gold. No, we have not yet seen the sort of spectacular punctuated equilibrium that FOFOA (and others) have posited will occur as a kind of culminating event in the ongoing evolution of Freegold. Still, the process of revaluation, however bland it has been to date, seems to me to be well underway.

You also wrote:

"I would think it more likely we have a gradual "managed devaluation" over a period of years to try and effect some rebalancing between consumer and saver counties, to put it crudely, along with heavy periodic doses of commodity price spikes and then rapid demand destruction declines."

The way of the past may, indeed, be the way forward, but, somehow, I am inclined to doubt that we will be spared some dramatic punctuation.I say this because my sense is that the wherewithal of those trying desperately to manage "gradual devaluation" is ebbing, and so, things are apt to get a tad less gradual.

I understand what you are saying, and I've said before that I am not trying to convince anyone who isn't willing to put in some time and effort and who isn't willing to live with a whole lot of uncertainty. That may end up being much fewer people than I could hope for, although TAE does have an ever-expanding readership. And my approach sn't novel at all, especially in other fields of scientific study. Either way, I would rather discuss what I believe to be the truth with a few people who are on the same page than practice law at some overwrought corporate firm or government agency, constantly struggling with the cognitive dissonance that would naturally result form compromising every single principle I have to support an extremely corrupt system. And I have no sympathy for people who apologize for past sins on their death bed...

Although I usually refrain from injecting ethical judgments into my articles, I obviously do have values that I try to live by. I'm not going to commodify my view into a neat little package so other people can consume it like candy and I can become very popular. And I'm not trying to imply that's what FOFOA is doing either... I'm just saying that if you can't accept any argument that fails to "go out on a limb" with very specific predictions or doesn't read like a bestseller with a happy ending, then you shouldn't even bother trying to understand most of my articles.

If labeling me as a stubborn and pompous intellectual or an out of touch philosopher helps you to ignore my views, then go ahead, but that's on you, not me.

"Let's talk about the odds of QE continuing, and if not, who is going to step up to plate to fund our debt, and at what interest rate level? How long can the banking industry sweep their toxic assets under the rug before it implodes? How will rising interest rates affect the timeline of a ratings downgrade, the bond market, or a possible currency crisis?"

We can also expect that housing bubbles in countries such as Australia and Canada will start to implode in lockstep with China, as their economies are both highly dependent on Chinese import demand for natural resources. A renewed round of real estate busts, combined with the ongoing slump in Europe and the U.S. and less aggressive monetary policy (-temporary- winding down of QE), will also feed off of and into a collapse in global equity and commodity values. That collapse will wipe out large swaths of imaginary capital existing on the books of major institutions. All of that leads us to Martenson's seminal question, "Who Will Buy All of the Bonds?", specifically meaning the public bonds of Europe and the U.S.

Martenson refers to the Treasury International Capital (TIC) Report in his piece, which indicated that there was a "lower-than-trend" net inflow of foreign capital ($26.9B) into long-term securities for the month of February, which includes those going into long-term Treasury bonds. When including short-term securities, we see that there was a healthy net inflow of $97.7B into U.S. bond markets from foreign investors. [4]. What this data indicates is that, during the month of February, there was significant foreign investment in U.S. bonds, but 72% of that was into short-term securities (which do not include 10 or 30-year Treasury bonds).

He goes on to conclude that this inflow dynamic will get worse as Japanese purchases drop off in the next few months, and that the proposed "spending cuts" for a few federal programs will hardly do anything to reduce the supply of Treasury bonds over this same time period. I agree that there is a strong possibility of reduced purchases by the Japanese government in the short-term, as well as the governments of China and the UK. In addition, the minuscule spending cuts will indeed be irrelevant to the overall size of the 2011-12 federal budget deficits.

To go from there to the conclusion that the U.S. Treasury faces an imminent funding crisis, however, requires a few major and unlikely assumptions; the classic hallmark of those fretting over hyperinflation of the dollar in the short-term. As briefly discussed above, a slowdown in foreign government purchases of U.S. Treasury bonds could be significantly offset by an increase of inflows from private foreign investors fleeing the equity, commodity, government agency and mortgage-related investments of other regions, as well as domestic investors fleeing those same risky investments.

And that's where we return to the IMF's little "hint" in its report from last week. The financial elites do not need anyone to buy ALL of the bonds, only those that are most important to maintaining their wealth extraction operations. The weak players? Well, they can all fight over the scraps and devour themselves in the financial marketplace. The truly significant capital will be transported towards a few central locations by natural forces and by human design, like lambs to the inevitable slaughter. Of these locations, the most critical are surely the U.S. Treasury market, which can be used to support major U.S. banks, and the U.S. currency market."

"What are the chances that the majority of people who find themselves invested in U.S. government bonds and the dollar will get anything close to a return on their investment over 10, 20 or 30 years? The answer to that is probably a massively negative percentage, because the psychological pain of holding on for that long will be even worse than the total wipe out itself. However, the herd typically doesn't figure out how close they were to the edge of the cliff until after they are tumbling down the other side...

...In addition, as discussed in Bailing Out The Thimble With The Titanic, the Fed may also be using Treasury put options to help them exert more control over long-term rates that cannot be reached as easily by QE programs. With regards to the latter, the following table is the Fed's "liquidity injection" schedule for the next month, which is certainly winding down, but still towers over any notional amount that has been "negotiated" by the politicians on Capitol Hill in their budget talks.

...As mentioned earlier in this piece, and many other times on The Automatic Earth, the dominant and natural economic trend is debt deflation, while the dominant (and natural) political trend is aggressive fiscal and monetary policies that are crafted to funnel money into major banks, rather than the productive economy. There are very few reasons to think that either of these trends will reverse in the short-term, either by design of the financial elite class or by the inadvertent consequences of their actions. They have no doubt painted themselves into a corner, but their corner is significantly larger than the concentration camps built to imprison a large majority of the global population. The latter fact is clearly evidenced by the perpetual taxpayer subsidies given to financial institutions in the sullied names of "economic recovery" and "austerity".

The cities of Greece continue to erupt in violence as its citizens are forced to bail out European banks, and, meanwhile, Americans continue to mistake their own reflections in the global mirror. Earlier this year, Standard & Poor's rating agency downgraded the outlook for the triple-A rated status of Treasury bonds (from "stable" to "negative"), in what was nothing less than an act of aiding and abetting the politicians, bankers and major corporate executives who strive for the imposition of austerity on everyone but themselves. The only difference between Greece and the U.S. is that the latter is not a "weak player" in the eyes of elite institutions, such as the IMF. Which means that, while the Greek taxpayers may soon be put out of their misery, we will die a much slower death, choking on our own debt for years to come."

Sorry, I know I said I was done with you, but just couldn't resist some more "agnostic puffery".

People I have reccomended FOFOA to have asked me lately if that blog has someting to do with gold or with ...ISM. Surely they didn't jump to the archives and spend there months there. And they are stupid newbies looking for answers to their worries about their savings being confronted with WHAT here in the comments section?In cas you didn't notice it FOFOA's blog is becoming more of a platform for that person than for gold.

As much as I appreciate Costata, which I really do, you such an adept of plitness, could it be that you didn't notice that he was quite harsh in his tone to ....

Ok, I am done with you too ;).LOL poor blog of FOFOA. That's what I call political degeneration in the comments.

The OPEC meeting ended, huge implications, no conclusion, a joint statement was done, there will be most likely an emergency meeting at some point. IMO OPEC is now split in two fractions. Here some comments:

...will follow on your one later. Thanks for heads up. Still in plan to recheck the TOD linkage. Yesterday I listened the online from OPEC. Very interesting, I was keeping an eye on anything unusual. Is the split between OPEC members such case? A failure of a huge negotiation is each time an alarm bell for next events. Flashbacks...

Do I read it correct that SA is with USD and others feel captive and demand change? They are handed over, do not have other way, but to go to BRICS? This would go along latest developments (US doing the biggest arm deal last year, next postponement of Gulf currency modeled by Euro, Libya invaded as a threat to other OPEC members, etc). Opinions?

Art: DP, for all your talk/advice about wallowing in the warm embrace of Freegold, it appears you are really just a masochist at heart. So should I systematically tear apart all of your flawed pot shots at me, or just the first one, and let others deduce the rest?

Good morning, Britney. I don't think you have really fully understood my role around here. I'm guessing that you think my primary objective here corresponds with yours: main concern to have people believe I'm smart. That being the case, you're misguided (and I don't just mean WRT your Marxist education). If people believe I'm smart, that would be just a nice bonus to me -- but I'm pretty sure I'm not on Joel's Nifty Fifty To Watch. (Boo hoo! :-) )

I am here as a student of FOFOA, to learn. So when I write something about Freegold in response to someone's comment, I write it in the hope that I understand correctly but in the expectation that somebody will correct me if I have it wrong. I see there are plenty of people here who will jump on anything and anyone that's wrong, so putting my thoughts out there for peer review seems to me to be the best way to learn. I already know I don't know everything there is to know about Freegold, although I am constantly amazed I am not getting jumped on by anyone except you -- and you are not saying anything related to Freegold, so far, which IMO makes your points somewhat irrelevant. I certainly don't know so much that I have encountered any flaws yet, even despite your best efforts to teach us all the flaw(s) that you have, apparently, identified. All I've seen from you is a lot of irrelevant wordage, and many self-publicising links to your various writings elsewhere.

The indications are that you -- and more importantly everyone else -- were correctly able to deduce the intended meanings contained in my comment to Joel/Terry, so I assume my language and reasoning must have been clear enough to everybody. It would seem that I need not discuss it further. I'm done with you, too.

@Costata: Q: "if the Iranian oil Bourse is created, does that mean countries like Saudi Arabia and Venezuela will have to trade only with the Euro?"http://www.mail-archive.com/sustainablelorgbiofuel@sustainablelists.org/msg68456.html->"April 2011: Iran inaugurated the third phase of oil bourse with vast opportunities for foreign companies. All types of contracts in the oil bourse will be based upon global standards of purchase and sale and in accordance with Islamic rules"http://en.wikipedia.org/wiki/Iranian_oil_bourse

The LBMA issue, I have provided enough info about connected refineries; there are some important pics for understanding why gold market is still held in London.

"March 19, 2005 — Iran does not pose a threat to the United State because of its nuclear projects, its WMD or its support to "terrorists organizations" as the American administration is claiming, but rather in its attempt to re-shape the global economic system by converting it from a petrodollar to a petroeuro system. Such conversion is looked upon as a flagrant declaration of economic war against the US that would flatten the revenues of the American corporations and eventually might cause an economic collapse.

In June of 2004 Iran declared its intention of setting up an international oil exchange (a bourse) denominated in the Euro currency. Many oil-producing as well as oil-consuming countries had expressed their welcome to such a petroeuro bourse. The Iranian reports had stated that this bourse might start its trade with the beginning of 2006. Naturally such an oil bourse would compete against London's International Petroleum Exchange (IPE), as well as against the New York Mercantile Exchange (NYMEX), both owned by American corporations.

Oil-consuming countries have no choice but to use the American Dollar to purchase their oil, since the Dollar has so far been the global standard monetary fund for oil exchange. This necessitates these countries keeping the Dollar in their central banks as their reserve fund, thus strengthening the American economy. But if Iran — followed by the other oil-producing countries — offered to accept the Euro as another choice for oil exchange the American economy would suffer a real crisis. We could witness this crisis at the end of 2005 and beginning of 2006 when oil investors would have the choice to pay $57 a barrel of oil at the American (NYMEX) and at London's (IPE) or pay 37 Euros a barrel at the Iranian oil bourse. Such choice would reduce trade volumes at both the Dollar-dependent (NYMEX) and at the (IPE). ..."

...and some musical cherry on the top of today´s links.http://www.youtube.com/watch?v=bJtvGTMDneY

I know everyone her keeps waiting for a gold spike, including me, but it just isn't happening. What I do see in the price is a choppy but manageable decline of USD value. So I conclude that is what TPTB want, for now. What actually got me thinking along these lines was a FOFOA statement awhile back the they have to let the price of gold rise in order to maintain the viability of the COMEX.

Whether they continue to want this (assuming that's what it is, ie a semi- official managed deval), or can control it, is another matter entirely.

But to me it's the central question of the viability of "Freegold": will governments willingly allow it, or not? In the US at least, the answer remains a pretty definitive "no", and I can't see what sequence of events or people would change that without an external catalyst.

"I have never been so pessimistic about U.S. policy in the Middle East as I am now," he says. He acknowledges that the Arab "oil weapon" no longer exists under present circumstances, but believes a "petrodollar weapon" is still viable, if used carefully and gradually. "For example, if New York's Bank X gets hurt badly as a result of a drawdown of Arab deposits, it might be inclined to lobby the government in favor of a new policy," he notes. But he warns that any sudden and massive shift of Arab government funds out of U.S. securities could trigger the International Emergency Economic Powers Act and end in a counterproductive freeze of the funds—as happened during 1980 in the case of Iran. In fact it was Dr. Oweiss who in the early seventies followed up his "petrodollar" creation by being the first to refer to such Middle East investments in the U.S. as "hostage capital." ..."

"Quietly but with malice, OPEC cartel nations have been dumping the U.S. dollar over the past three years, according to the Bank for International Settlements (BIS)...

Hans Redeker, global head of foreign exchange strategy at the French bank BNP Paribas, blamed the U.S. Patriot Act.

"If you trade with what the U.S. regards as a 'dodgy' bank, you are at risk of your assets in the U.S. being frozen," he said. "After the re-election of George Bush, the Middle East started to sell dollars like crazy due to the fears of assets being frozen."

The effect of the move away from the dollar has left the U.S. financial interests with a black eye.

Critics of the European Union have suggested that the introduction of the common currency known as the Euro was an effort to weaken the dollar's supremacy and to steal the OPEC account from the U.S. dollar.

These claims may be justified with the latest data from the Bank for International Settlements."

[Mrt: would be nice to see such report & updated version if exists, not sure about article credibility.]

"Financial Repression" is currently a hot buzzword in the global economic community, and its effects are even worse than it sounds. Like other recent economic buzzwords such as "monetary sterilization" and "quantitative easing", the average person will never understand the meaning, if they hear the phrase at all.

"I already know I don't know everything there is to know about Freegold, although I am constantly amazed I am not getting jumped on by anyone except you -- and you are not saying anything related to Freegold, so far, which IMO makes your points somewhat irrelevant."

That is how my whole string of comments here started off (most recently). Two people posted links to my Part III article and asked FOFOA to comment. The entire series has made lengthy references to Freegold and my perceived flaws in it. Surely it's not too much to ask for people to follow links, but I also don't mind using the copying and paste function if that makes it easier.

That comment wasn't entirely directed at you, as much as Joel/Terry and a few others who have made comments along those lines, although you certainly implied that I enjoyed "tedious" arguing and all my writing was essentially "philosophy" that is "too much work" to understand. A lot of people have tried to use those type of arguments here to ignore any of the substantive points I have made in those articles... that's all I was saying.

DP,

What did you expect? That you could just jump in and try to make me look foolish for bashing Joel and Terry, and I wouldn't respond to defend myself? Why do you even defend the logical reasoning abilities of those jokers anyway? I'm quite sure you know, just as well as I do, that they have very little understanding about any of the arguments/counter-arguments we have been making in this or previous threads.

And it's not about having read every economics book out there, or knowing everything there is to know about Mises and Marx and whoever. It's just basic logical reasoning ability, common sense and a bit of tolerance that they lack. You're right, though, there's no point going on back and forth about this stuff... especially with them.

If people have substantive questions or contentions they wish to bring up with my argument against Freegold, then I'll address that. If someone takes a wholly illogical swipe at me as a means of discrediting my argument, then I'll just hope the more astute readers here will dismiss it as vitriolic and uninformed junk. I include you, DP, among one of the astute readers here.

I often see praise of Euro here. But isn't the advantage of EUR over USD purely theoretical? Ok, ECB marks it's gold reserves to market. So what? Can that prevent Eurozone from breaking up? Will it be enough to retain it's credibility?

The whole Euro deal looks more and more like a failed experiment. Apparently, "one size fits all" does not work for currencies. It did not stop all those socialist states bury themselves in huge pile of debt, that's for sure. I have no doubts that the dollar will collapse, but I'm pretty sure it will be the last one to do so.

Mind you, this is just an opinion of a little ant living in the periphery of EU, still hoping that Eurozone is something that happens to others.

Question (unusual, I know): How long do those here generally expect the dollar and gold to appreciate together before a decoupling? I believe FOFOA wrote the dollar would only appreciate for a few months at most in one of his pieces, but is that when the appreciation is relative to gold, or appreciation in general, even if gold is keeping pace?

Does Ash's opinion of socialism make it my opinion? No, but there is enough supporting data to make it highly likely that the Rothschild fortune is the largest on the planet, and that they are the defacto owners of planet Earth.Read the article, I think it is properly annotated and fairly accurate.

the "praise" you're referring to isn't about the euro itself but the dual system of currency(euro) : store of value(gold) that makes the concept different from other monetary systems. Euro itself has just the same flaws as the dollar, but its (dis)connection to gold, makes it a better alternative right now.

"Eurozone breaking up"

There will be no breakup if the ECB is able to deliver what the're supposed to - price stability. If anybody listened to mr. Trichet answering questions today, no doubt he/she noticed two important things... price stability and no default. When asked specifically about the rating agencies (Moody's, Fitch, S&P) proclaiming a credit event (default) regarding Greece bonds, he basically said that the ECB doesn't answer or act on their tune.

In view of latest development about gold as collateral (to give credibility) and ECBs strong recommendation that default is not an option, I think that we're in for a very hot summer in financial markets.

Of course there's no 100% certainty, so maybe we'll still get a late minute surprise... or not.

Radix46:"If I wrote an article suggesting that the Rothschild fortune was $200 trillion, would that make it $200 trillion?"****************I understand what you're suggesting, that if someone wrote that gold would someday jump to $60,000/oz, that wouldn't make it true. I agree, we each are charged with making a decision about what to believe. With the gross amount of dis-information that abounds, that becomes more difficult daily. My research leads me to believe that Freegold is possible, and that the Rothschilds represent the owners of this planet. I am hoping, much like Art, to convince the readers of what I believe to be true. I have never read Say or Keynes, so I can't argue with Art. But I have read plenty about socialism versus capitalism, and I know which I choose. NOT Socialism!

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